Of course, just because a company's share price is low doesn't make the stock "cheap." Valuation comes down to the cash streams, or potential cash streams, your shares buy access to. 

Still, some investors like to look for stocks with low share prices, as it can be a little easier to build a position in them than a mega-cap tech stock trading in the hundreds. 

Today I'll be taking a close look at a handful of stocks selling for less than $5 a share. Are they bargains? Ultimately, that's for you to decide.

Cartoon figure with binoculars looking at stock chart.

LOOKING FOR CHEAP STOCKS THAT COULD GO UP A LOT? WHAT A COINCIDENCE! SO ARE WE! IMAGE SOURCE: GETTY IMAGES.

AU Optronics

Our first step in today's search is something of a doozy -- because we're going all the way to Taiwan, home of liquid crystal display specialist AU Optronics (NYSE:AUO). Priced under $4 a share, AU Optronics stock doesn't cost a lot, but don't be fooled -- this is not fly by-night penny stock we're talking about here. AU Optronics has so many sub-$5 shares of stock outstanding that the company's total market capitalization exceeds $3.7 billion (and so much debt that its enterprise value is over $4.8 billion).

And yet, even at those bigger numbers, AU Optronics stock looks like a good bargain. Over the past 12 months, AU Optronics has reported net income of $819 million, which relative to its market capitalization gives it a P/E ratio of just 4.6. Even adjusted for debt, the company sells for an enterprise value just 5.9 times trailing profits.

AU Optronics is coming off a rough fiscal 2016  that saw the company dip into negative free cash flow despite reporting positive GAAP profits. But already in the first quarter of 2017, AU Optronics has its head back above water and free cash flow running positive again. Given that the company has reported strong cash profits in three of the past five years, I have little doubt AU Optronics will continue to perform strongly over the long term. At today's low prices, that makes the stock look like a very promising bargain.

Avon Products

The story at Avon Products (NYSE:AVP) is similar. A fixture of the American cosmetics market for more than a century, Avon's business needs no introduction here, so let's skip right to the financials.

Traditional financial accounting methods make Avon stock look terribly unattractive -- which may offer investors who look deeper an opportunity to profit. You see, under GAAP accounting, Avon has reported negative profits in each of the past five years. It's only now, in 2017, that Avon is beginning to show GAAP profits again ($22 million for the past 12 months).

And yet, much like AU Optronics, and despite what the GAAP numbers suggest, Avon really is a cash machine. Over the past 12 months, Avon has reported positive free cash flow  of nearly $120 million, and the company has generated positive cash profits in four of the past five years (2016 being its only bad year). Valued on its more recent performance, Avon's $1.6 billion market cap gives the stock a P/E ratio of 73 -- but a price-to-free cash flow ratio of just 13.5. Even factoring debt into the picture, the stock's enterprise value-to-free cash flow ratio is only 24.6 -- expensive, but perhaps not unreasonable given analyst projections that corporate profits will triple this year (and grow 50% in 2018 ), while free cash flow expands to more than $180 million this year and $200 million next year.

I see a lot of room for growth at Avon Products.

Intelsat

With a share price under $3 and a market capitalization of barely $350 million, communications satellite operator Intelsat S.A. (NYSE:I) is by some measures the cheapest stock on our list today. But by another measure it's the most expensive -- by a large margin.

Intelsat is a very special situation, you see. For one thing, it's a stock with a boatload of debt -- $14.5 billion worth of debt on its balance sheet, against barely $622 million of cash. Intelsat is also in the middle of a complex merger that will see it first buy out rival satellite operator OneWeb, then sell 39.9% of its own shares to SoftBank.

This process will create a hybrid constellation comprising large satellites (from Intelsat) and more numerous small satellites (from OneWeb). It will also transform Intelsat into a minority-owned subsidiary of SoftBank -- one with vastly more shares outstanding (about 919 million versus 119 million today) and significantly less debt (because SoftBank will pay Intelsat $1.7 billion for its stake in the company, and help to negotiate a $3.6 billion write-off of Intelsat's debt by the company's creditors).

As you can see, this is a complicated situation with lots of moving parts -- and the merger may not even take place. If it does, though, we could soon be looking at a company with annual profits of roughly $940 million, and a post-merger enterprise value of about $13.5 billion. The resulting debt-adjusted P/E ratio of 14.4 doesn't seem too expensive for the satellite communications powerhouse that would emerge from all this chaos. 

Rich Smith has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.