It's not hard to find stocks priced below $20 per share, even though every major market index is soaring at or near all-time highs. Some low-priced stocks are trading at a discount for good reason but great risk also brings great potential returns. You need to avoid value-trap landmines in your search for strong companies that will survive the COVID-19 health crisis and thrive in the long run.
Here are three great tech companies that are trading below $20 per share today. Read on to see why they look like great buys at these low prices.
Image source: Getty Images.
1. Nano Dimension: $15.67
Florida-based 3D printer maker Nano Dimension (NNDM -3.83%) has found a unique niche within its field. The company's printers can deploy electronic circuitry directly on and in 3D-printed items. This allows Nano Dimension's customers to develop, try out, and improve their own electronic devices at breakneck speed.
Just as Nano Dimension's first full-featured printing system was ready for orders, the COVID-19 health crisis came along and halted the equipment ordering plans of the company's prospective customers. Management acknowledged the difficult operating environment and decided to delay its marketing push. Nano Dimension expects that the first substantial business results will come in early 2022, but the long-term market opportunity should be enormous. In fact, the pandemic will probably increase the demand for quick-turn electronics development facilities in the long run, expanding Nano Dimension's addressable market.
This would be a risky strategy for most micro-cap companies but Nano Dimension is equipped with a robust balance sheet. The company has no debt and $675 million of cash on hand. That should be enough to carry Nano Dimension through several lean years and position it for long-term success.
This is not a cheap stock, having gained 1,140% over the last year as investors flocked to the company's potential to create long-term value. Nano Dimension may not be your cup of tea if you prefer slow and steady growth over an unproven business plan with ambitious growth targets. But if you like to get in on the ground floor of a future industry giant, Nano Dimension could be exactly that.
2. Ericsson: $13.59
Swedish telecom equipment and network maintenance services company Telefonaktiebolaget LM Ericsson (ERIC -2.04%) may come with a small price tag but the company is actually a giant. Ericsson's market cap stands at $45.3 billion and the company collected revenue of $28 billion in 2020. That's not small potatoes. The stock happens to be cheap because Ericsson split its shares many times in the golden age of the late 1990s.
We're talking about a leading provider of infrastructure hardware and services for the global rollout of 5G wireless networks. The telecom industry has been champing at the bit to take that game-changing step, only to have its plans delayed by the unexpected coronavirus pandemic. But the upgrades are happening again, and Ericsson is taking full advantage of the opportunity.
Last month's fourth-quarter report absolutely crushed analyst expectations. Earnings jumped 70% higher year over year on a 5% revenue increase. The company met the long-term operating margin targets it had expected to reach by 2022. Here's what Ericsson's revenue and free cash flow trends look like over the last three years:
ERIC Revenue (TTM) data by YCharts
With results like these, it's no surprise to see Ericsson's stock price rising 55% over the last 52 weeks. The shares still look affordable at 15 times forward earnings, especially in the light of the hockey-stick sales growth. And the best is yet to come as 5G networks continue to roll out around the globe.
3. Himax: $15.29
Taiwan's Himax Technologies (HIMX -1.72%) is a fabless semiconductor designer, focused on display driver chips for digital screens. These processors can be found in smartphones, television sets, laptop screens, the dashboard in your car, and more. The company is on a roll right now. Last week's fourth-quarter report saw sales rising 58% year over year to $276 million, thanks to broad-based shipment growth across all of Himax's major target markets. Smartphone display driver sales jumped $173 higher and tablet screen driver revenue nearly quadrupled. Adjusted earnings rose from $0.01 to $0.20 per share. Your average Wall Street analyst would have settled for earnings of roughly $0.17 per share on revenue near $268 million.
The company is adjusting to a global shortage of manufacturing capacity among the semiconductor foundries that actually build Himax's processors. Tablet display drivers are prioritized over other chip types while the capacity crunch lasts, because Himax CEO Jordan Wu describes his company as "the dominant supplier in Android tablets in every market."
Image source: Getty Images.
Himax is going places, sparking a huge wave of investor interest in recent months. The stock has gained 227% in 52 weeks and more than doubled in 2021 alone. This is also a highly profitable company, so Himax shares are trading at reasonable valuation ratios such as 24 times free cash flows and 16 times forward earnings despite the skyrocketing stock price. If Nano Dimension scares you and Ericsson bores you, Himax just might have the balance between risk and reward that you're looking for.
This article represents the opinion of the writer(s), who may disagree with the "official" recommendation position of a Motley Fool premium advisory service. We're motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
