Here at Zacks, we don’t generally classify stocks as “cheap” or “expensive,” and rather than looking at the stock’s face value, we have a system that puts an emphasis on earnings estimate revisions to find stocks that will hopefully be winners for investors.
That being said, low-priced stocks can be attractive to smaller investors that can’t necessarily afford large stakes in companies with higher priced shares. When looking at these low-priced stocks, we can look at the same trends in growth, value, and momentum and apply the Zacks Rank to properly analyze the potential that these companies have.
Today we’ve highlighted five stocks that are currently trading for under $10 per share. All of these stocks currently sport a Zacks Rank #2 (Buy) or better, and the selected companies are showing signs of outpacing the market in the current calendar year.
Check out these five great stocks for 2018:
Hot Heal Care Stocks To Buy Right Now: Johnson & Johnson(JNJ)
Despite a reasonable valuation, solid growth and what I considered a good earnings result earlier this month, Johnson & Johnson (NYSE:JNJ) has had trouble finding its mojo.
For the reasons I noted above, long-term bulls may feel just fine holding onto J&J, whether it’s at $120 or $140. For the short-term traders out there though, it’s hard to feel bullish. JNJ has been pulverized since mid-January and hasn’t recouped any of those losses, as it now rests below all three key moving averages.
This $124 to $126 level has been support lately. Below that and it’s hard to say where JNJ goes. It’s recent closing low and recent low could be in play if that’s the case. It probably won’t get there without a big market decline, but JNJ would yield 3% near $114, where income buyers would surely start to step in. Also worth noting is that the average price target for JNJ sits up at $141.50.
J&J is a fund-favorite. So as long as they’re buying equities, I expect JNJ to have a bid, with or without $125 holding.
Hot Heal Care Stocks To Buy Right Now: Eclipse Resources Corporation(ECR)
Eclipse Resources Corp (NYSE:ECR) shares are pushing above their 50-day moving average for the first time since January, pushing up and out of a three-month consolidation range. Merely a return to the 200-day moving average would be worth a 50%-plus gain from here.
Back in March, management issued updated projections on two of its Mercellus wells and initiated a strategic review. At the end of last year, production was up 22% from the year-ago period, with proved reserves up 211%.
Hot Heal Care Stocks To Buy Right Now: Paylocity Holding Corporation(PCTY)
Lewis: Another smaller player here is Paylocity. This company, I think it’s about a $1.7 billion market cap business, what do they do?
Feroldi: Paylocity does cloud-based human resources software. As you might have guessed from their name, their bread and butter is payroll. They go after small businesses that have a few employees, just to get them on a platform for doing payroll. But they also offer a number of other services on top of that. Payroll is kind of how they get their foot in the door, but they also offer things like benefits management, you can do time and attendance on there, you can do employee reviews, a whole bunch of general HR functions, on their platform.
As you can imagine, this is a very old business. When you think about your ADPs and your Paychexs of the world, those guys have existed for years. What Paylocity does that’s a little bit different is, they were founded on a mobile-first strategy. Their software is 100% based in the cloud, and it’s really designed to be used on a phone, a tablet, or PC kind of last. That’s how they set themselves apart from the big boys.
Lewis: Yeah. Hearing you talk about this company, I’m reminded, in a way, a little bit, of another business that I really like, and that’s Square. You think about how it’s mobile-first, it seems like it’s very oriented toward small shops and making the getting-setup very simple for small business owners.
Feroldi: That’s exactly right.
Lewis: HR stuff, one, it’s a space that you want to have your stuff together. You want to be organized. But it’s something that a lot of people don’t have training doing. And having organized systems coming into, this is what this should look like, and picking up that template from a business, is really helpful. It’s also stuff that a lot of people don’t really want to do. So, having a company that can take care of some of the messier or maybe less-sexy parts of your business is always going to be a good opportunity, if you’re looking for places to serve customers.
Feroldi: Absolutely. Payroll is boring, but it’s absolutely mission-critical. I don’t know about you, I like getting a paycheck every week.
Lewis: Yeah. I only get paid every two weeks, but every two weeks, I look forward to it. [laughs]
Feroldi: Absolutely. And when you take on an employee, there are some things that they just naturally expect from the business. They expect you to have your 401(K) set up, they expect you to have your payroll act together, they expect to be able to have some kind of system for logging their hours if they’re hourly. So, what I like about Paylocity is, once they get their teeth into a business, they can then layer on services on top of that to bring in more functionality. These guys recently just acquired a small company that provides flexible spending accounts and health savings accounts, so they’re starting to get into the health insurance side of it. And with that acquisition, they can then take this thing that they built and offer it out to all of their clients to grow their revenue within their client base, let alone when they add on new customers.
So, this is a repeat purchase business. Their top line is growing very quickly, 25% annually. 97% of their revenue is recurring. They did about $300 million in revenue last year, which was high enough to get them to profitability. They’re cash flow positive. And management sees an opportunity in the U.S. of about $26 billion.
Now, these guys are facing much more competition, I would say, than the other two, because, again, they’ll eventually butt heads with the likes of ADP and Paychex, but I think that they have a solution that’s unique enough that they can still continue to grow quickly.
Hot Heal Care Stocks To Buy Right Now: Alibaba Group Holding Limited(BABA)
Alibaba Group Holding Ltd (NYSE:BABA) has a lot going for it right now, including massive outperformance across 2017. Just look at a chart through January 2018 and you’ll see that this stock almost always goes up — rarely down!
But it’s more than just momentum that matters.
For starters, BABA stock is the main e-commerce player in China, and the Chinese economy remains healthy. Although a barrage of negative press has caused many investors to sour on the region, remember that a slowing growth rate does not mean the end of growth. Sure, 10% GDP expansion would be better … but given the rest of the world, a 6% clip is pretty darn nice!
This means citizens transitioning to the middle class and entering the online world will help power Alibaba’s growth far into the future. That shows up constantly in the company’s growth rate, which includes a stunning growth forecast of 56% revenue expansion this year. On top of that, EPS is also expected to jump almost 39% in fiscal 2018!
This is where the numbers get interesting, because that big profit potential and revenue growth has fueled aggressive acquisitions. Alibaba has a very long-term vision and made a bold investment in microblogging platform Weibo Corp (ADR) (NASDAQ:WB) — a Chinese version of Twitter Inc (NYSE:TWTR) – last year. Unlike troubled growth metrics at TWTR, Weibo crushed first-quarter 2017 estimates, and this provides yet another path to growth for the internet giant.
As a result, the time is perfect to buy BABA stock, since it has a dominant share in the growing e-commerce space and continues to make bold bets on the future.
Shares have roughly doubled in the last year or so, and continued appreciation could send BABA stock to a 3x gain easily enough in 2018. Just make sure to keep an eye on the buy-below price, and enter in on any short-lived dips.