Low-priced stocks are that way for a reason.
Sometimes it's a turnaround that never turned around. Sometimes it's a fading company taking the scenic road to zero.
However, more often than not it's a flawed entity that's losing money.
Thankfully that isn't always the case, and I'm here to single out some of the more intriguing exceptions to the rule.
Naturally I wouldn't be doing you any favors if I just screened for companies that are currently in the black. What if it's a fluke? What if the future is murky? I dug a little deeper to make sure that we're only looking at companies that are not only generating positive earnings now but building on that profitability in the near future.
|Sirius XM Radio (Nasdaq: SIRI )||$2.14||$0.06||$0.07|
|Giant Interactive (NYSE: GA )||$4.01||$0.62||$0.76|
|8x8 (Nasdaq: EGHT ) *||$4.50||$0.11||$0.16|
|Taseko Mines (AMEX: TGB )||$3.70||$0.15||$0.18|
|China Digital TV (NYSE: STV )||$3.56||$0.64||$0.69|
Source: Finviz.com. *8x8's fiscal year ends in March, and "Past Year" is the one ending next month.
Let's go over the five companies.
Sirius XM is the popular satellite radio service with 21.9 million subscribers. The premium media company reports earnings next week, and analysts are expecting another quarter of modest top-line growth. Despite the growing array of streaming options and cars that make it easier for smartphone owners to lean on their Web-tethered gadgetry to stream audio entertainment, Sirius XM continues to tack on incremental listeners.
Giant Interactive is one of the seemingly forgotten companies providing online gaming in China. How can one describe Giant Interactive any other way? The shares are fetching a mere five times this new year's projected profitability! Even if China does get more restrictive about Internet usage, it's not as if folks are engaging in Giant Interactive's virtual realms to overthrow the government. The company has had its hiccups along the way, but it shouldn't be ignored now that it's climbing back.
8x8 made the cut a few weeks ago for my monthly list of attractive stocks trading for less than $10 a share. It specializes in Internet-based telephone service, and profitability has been consistent, as the company has generated positive net income in 11 consecutive quarters. Revenue grew 31% in its most recent quarter, and 8x8's profit of $0.04 a share landed well ahead of the prognosticators.
"With Taseko Mines trading beneath fair value for its flagship Gibraltar copper and molybdenum mine, those shares basically imply free exposure to a potential world-class niobium deposit and the company's controversial New Prosperity copper gold project," fellow Fool Christopher Barker wrote less than four months ago. Shares of Taseko have inched a bit higher since then, but the very profitable miner is still trading for about the price of a cheap value meal.
Finally, there is China Digital TV. The world's most populous country is in the process of migrating to digital television transmissions, and that's translating into big business for China Digital TV. This is the top dog when it comes to smart cards that connect set-top boxes and televisions to digital cable systems. The stock took a hit after posting weaker-than-expected results in its previous quarter, but this is still a sensible play on China's emerging middle class.
Earnings aren't forever
These five companies are turning healthy profits now, and analysts see even stronger earnings growth in the coming year. This doesn't mean that the good times will go on forever. Obviously you will want to keep an eye on their upcoming quarterly reports. You don't want worrywarts to catch what optimistic analysts are missing.
However, these five companies are profitable enough to make investors feel comfortable that they're not taking the kind of risks that are typically associated with fishing for low-priced stocks.
It's a good place to be.
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