Just because a stock has a low share price, that doesn't mean it's a great deal. There are many stocks under $10 per share with bad fundamentals, no earnings, or bad management that aren't going anywhere. For every start-up that's on its way up, there are several companies that have plummeted under $10 because of beaten-down industries or mismanagement.
But you will also find strong companies in this price range that have seen their stock drop temporarily due to outside forces like the pandemic and are poised to bounce back. Here are two stocks priced under $10 per share that are worthy of consideration.
Investors Bancorp is priced and poised to move
Investors Bancorp ( ISBC 2.16% ) is the holding company for Investors Bank, a regional bank based in Short Hills, New Jersey. At 155 branches, it's the largest bank based in the Garden State, and its local brand and presence have given it an advantage over its large competitors. It has gradually branched out in both the New York and Philadelphia suburbs, primarily through acquisitions. In the third quarter, it acquired Gold Coast Bancorp, which has branches on Long Island.
The bank benefits from being a leader in one of the wealthiest areas of the country and the nation's leading money center. The proof is in the consistent earnings it has posted, averaging double-digit annual earnings growth over the past five years. In the third quarter, net income rose 16% year over year to $64 million. Its provision of credit losses was only $8.3 million, down from $33 million the previous quarter. This is due to the bank's high-quality loan portfolio, with a low overall loan-to-value ratio of 53%. That means the average loan customer puts more down and borrows less, making it less of a risk.
The bank is undervalued, with its $9.94 closing price on Friday comfortably below its book value of $11 per share. So look for that stock price to start moving up as the economy improves into 2021 and beyond.
Analysts project the company's stock price to increase by double-digits over the next 12 months. With its high-quality loan portfolio, market-leading position, and excellent cash position -- which has grown from $174 million at the start of the year to $557 million at the end of Q3 -- Investors Bancorp should be a winner for your portfolio as we emerge from the recession.
PaySign has carved out a nice niche
PaySign ( PAYS 1.73% ) is a provider of prepaid cards and payment processing services for small and mid-sized business. It focuses on the healthcare and pharmaceutical industries, in addition to some retail and hospitality companies. The cards are used for incentives and rewards, payment disbursements to employees, or medical payment solutions.
Plasma donations are one of its biggest revenue drivers for PaySign, as individuals who donate plasma are paid via the PaySign card. That revenue has dropped off significantly during the pandemic as people stopped donating. As a result, the company posted a net loss in the quarter, with plasma donation revenue down 24% year over year. Another reason for the net loss was a change to accounting practices in how the company calculates revenue in the pharmaceutical industry. Without the accounting change, revenue would have only been down about 4.7%. As a result, the stock has dropped over 50% in the past few months and sat at just over $5 per share at Friday's close.
The company has had a solid track record, boosting revenue each year from 2014 until 2020. It has carved out a terrific niche in the healthcare space as a provider of prepaid cards and payment solutions that should continue to grow long term, as the economy improves and prepaid cards become increasingly utilized as society moves away from cash payments. The stock may sputter for a few more quarters until a coronavirus vaccine comes out, but it should see strong long-term gains based on its niche, past success, and societal trends.
These two stocks have been waylaid by temporary market forces, but they both show underlying strength that should allow them to bounce back nicely for investors who buy today.