It's never a bad time to look for bargains on the stock market, but with the S&P 500 at an all-time high and valuations looking stretched, now looks like an especially important time to hunt for cheap stocks.
While price alone doesn't tell you how cheap a stock is -- you're better off looking at the price-to-earnings ratio for that -- a share price under $20 is often an indicator that a stock has fallen from higher levels, and could offer ample opportunity as a turnaround play or a long-term growth stock. That price point also offers newer investors a shot at a low-stakes purchase, one that won't break their budget.
Keep reading to discover three stocks under $20 that are worth buying today.
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1. Angi
The product of a 2017 merger between HomeAdvisor and Angie's List, Angi (ANGI 0.99%) has never quite lived up to its potential. The company is the leading online home services marketplace, helping homeowners find everything from plumbers to painters to house cleaners, but has struggled to grow through the pandemic as demand on its platform exhausted its supply of home service providers.
That challenge has weighed on the stock, but that could soon change. Not only is the economy on its way to normalizing as more people get vaccinated, but Angi has also recently rebranded under a new management team, which is focused on turning around the business.
The core of its growth strategy is building out its fixed-price platform, which offer customers an easy way to book jobs -- and more importantly, gives the company an opportunity to go directly to service professionals with jobs in hand, rather than just a platform where professionals can find customers. In addition to improving and growing the fixed-price product, the company is also focused on features like payment collection and financing, helping to eliminate the friction between buyers and sellers on the platform.
If Angi gets it right, the opportunity is enormous, as the home service market could be worth as much as $500 billion.
2. Carparts.com
Carparts.com (PRTS 0.78%) stock has been a big winner over the last year. The online auto parts seller benefited from both the shift to the e-commerce channel and a broader boom in the auto parts industry as sales of used cars spiked and Americans avoided mass transit.
The good news for the stock is that even as the pandemic fades, those trends driving its growth seem likely to stick around. Auto manufacturers are facing a shortage of semiconductors, which has curtailed supply even as demand remains strong. That should drive elevated sales of used cars and lead to delays in new car purchases, pushing sales of replacement auto parts higher. Demand in the sector has remained robust, especially with the two stimulus payments Americans have received this year, and sales of new vehicles and parts rose 15% in March, according to the Census Bureau, portending a strong first quarter for Carparts.com.
Over the longer term, Carparts.com is also in the midst of its own turnaround plan, upgrading its tech infrastructure, streamlining its focus from multiple brands to just Carparts.com, and expanding into mechanical parts like brakes after historically selling just structural and cosmetic parts.
With revenue having jumped 90% in the fourth quarter, Carparts.com is bringing a ton of momentum into 2021. The current analyst consensus of just 11% revenue growth this year seems to significantly underestimate the growth trajectory of the business this year and beyond.
3. AppHarvest
One of the more intriguing companies to go public in recent months is AppHarvest (APPH), a development-stage agriculture tech company that went public through a SPAC merger in January. As a development-stage company, AppHarvest had no revenue in 2020, but its disruptive approach to agriculture makes it a stock worth watching, and one that could potentially skyrocket.
AppHarvest operates indoor farms. It currently has one in operation and two under construction, all of them in Kentucky. Growing indoors has a number of advantages. AppHarvest says that its massive indoor farms -- which are up to 60 acres -- use 90% less water than conventional agriculture, can operate year-around without being affected by seasons or weather, and are capable of yielding 30 times more food per acre than a typical farm.
The company is only growing tomatoes at its first farm in Morehead, Ky., and plans to grow fruits, vegetables, and leafy greens at its two upcoming facilities. It expects to eventually produce 45 million pounds of tomatoes at its first facility, which would have a retail value of near $100 million.
For the current year, AppHarvest expects revenue of $20 million-$25 million, and the company is currently valued at $1.5 billion, meaning the stock is very expensive by traditional metrics. AppHarvest may be a high-risk stock, but even at the current price it offers tremendous upside potential, especially as it seems to solve many of the problems with modern agriculture, such as dwindling farmland and water scarcity.
If the company can execute on its mission, the stock could be a huge winner.
