Before I start, I believe it is necessary to disclaim that cheaper stocks are not stress-free to buy and do not necessarily offer a smoother path to profitability than more costly offerings. Nonetheless, it's indisputable that many investors have natural inclinations toward low-priced equities, which are more volatile than their high-priced peers. This naturally higher volatility opens up the possibility of bigger gains in a shorter period of time, however, I advise you to assess your individual risk tolerance and fiscal situation to determine which investing strategy is best for you.
The following five stocks have certain positive fundamentals or characteristics and share prices trading at or below $5. The usual caveats apply, but these low-cost shares have positive upsides that make them viable options for the rest of March 2013.
1. Zix Corportation - (ZIXI)
The Breakdown
Zix Corporation provides the only email encryption services designed with your most important relationships in mind. The most influential companies and government organizations use the proven ZixCorp Email Encryption Services, including WellPoint, the SEC and more than 1,200 hospitals and 1,600 financial institutions. ZixCorp Email Encryption Services are powered by ZixDirectory, the largest email encryption community in the world. The tens of millions of ZixDirectory members can feel secure knowing their most important relationships are protected.
Analyst Ratings and Analysis
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Fundamentally, ZIX Corporation is very solid. The company has a gross profit margin of 82.18% and net profit margin of 52.92%, ranking it in the 90th percentile of the computer services industry. Zix has no debt and it has a very low trailing P/E of 10.95. The average annual earnings growth for the past 5 years was extremely high at 50.83% and the average annual earnings growth estimates for the next 5 years is also very high at 20%. The company is trading 7% below its 52-week high and has 39% upside potential based on the consensus mean target price of $5.08. In the latest annual report, Zix delivered a profit that beat Wall Street's expectations - adjusted earnings per share increased 25% to $0.05 in the quarter versus EPS of $0.04 in the year-earlier quarter. Analysts Thomson Reuters, MarketEdge and Smart Consensus all recommend the stock and rate it as a buy.
Next Earnings Date: April 22nd, 2013
The Bottom Line
Zix corporation has outstanding fundamentals and even better growth potential. Revenue rose 18.3% to $11.7 million from just a year ago and will continue to grow under the direction of Richard Spurr. I believe this stock is an excellent option for any investor looking for a high-value stock.
2. ValueVision Media- (VVTV)
The Breakdown
The multi-channel electronic retailer recently reported a larger loss for the fourth quarter reflecting a large asset valuation charge, but showed revenue increase of 20 percent - rising from 147.5 million to 177.5 million. In early March, ValueVision Media announced that its home and beauty businesses did well and its consumer electronics unit recovered from a year earlier.
Analyst Ratings and Analysis
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MarktEdge, Smart Consensus and Thomson Reuters are all specifying positive growth and strong buy signals. VVTV's Gross Margin is more than 83% of other companies in the Retail (Department & Discount) industry, has an EPS Growth Rate greater than 95% of its peers, and is proving to be one of the fastest growing electronic retailers in the industry. In January of 2013, there was some significant insider activity as Keith Stewart (CEO), Sean Orr (Director), and Joseph Berardino (Director) purchased more than 154,000 shares for a combined market value of $337,000.
Next Earnings Date: May 13, 2013
The Bottom Line
ValueVision is one of the fastest growing companies in the retail industry. Although ValueVision had a loss and missed Wall Street's expectations, the electronic retailer beat the revenue expectation and is great option for an investor seeking high growth out of the company.
3. Alcatel-Lucent - (ALU)
The Breakdown
Alcatel-Lucent provides networking and communications technology, products, and services to service providers, enterprises, and governments worldwide. The company designs routers, multi-service wide-area-network switches, and content delivery network appliances. In addition, the company manufactures and markets microwave wireless transmission and optical networking equipment and wireless products for 2G, 3G, and 4G networks.
ALU's stock had a mixed year; the stock started rising after the company was able to raise funds at the end of the last year. However, fourth-quarter and full-year results had negative impact on the price and the stock again came down. There have been a lot of changes at the company, which may prove to be important for the company in the long term. Alcatel-Lucent will have a new CEO by the start of April, who is expected to turn the company around. Furthermore, the company may go through another merger for consolidation in the industry.
Analyst Rating and Analysis
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Thomson Reuters rates ALU has a buy, but make no mistake, fundamentally, Alcatel-Lucent needs to make adjustments. Alcatel-Lucent desperately needs to cut costs and increase revenue, as the company cannot carry on in the current condition for long. However, there are some positives - EPS growth for next year is expected to increase by 65% and the company has a book value of 1.33x - one of the lowest in the industry.
Next Earnings Date: April 26th, 2013
The Bottom Line
This stock is definitely risky, but with new management starting in April, I believe ALU has the ability to turn over a new egg. The competition is intense in the market; however, due to increasing demand for data services and networking equipment, there is also attractive opportunity available. Alcatel-Lucent shareholders will have to be patient and see what the new leadership has in mind. If the new CEO is able to present a clear plan and implements it successfully; Alcatel-Lucent might reach its previous heights.
4. Nokia - (NOK)
The Breakdown
Nokia Corporation (Nokia) has three operating segments: Devices & Services, NAVTEQ, and Nokia Siemens Networks which are responsible for developing mobile products and other applications. Nokia has around 97,798 employees across 120 countries, sales in more than 150 countries and is the world's 2nd largest mobile phone maker by units produced (Samsung is 1st). Over the past five years, Nokia has suffered a declining market share as a result of the growing use of smartphones from other vendors, principally the Apple iPhone and devices running on Google's Android operating system. As a result, its share price has fallen from a high of US$40 in late 2007 to under US$2 in mid-2012.
Analyst Rating and Estimates
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The company is currently trading 37% below its 52-week high. Fundamentally, Nokia has several positives. The stock is trading for 1.3 times book value, 33% of sales and has $3.07 in cash per share. EPS next year is expected to rise by 78%.
Technically, the stock has rebounded nicely since July and has established an uptrend. In a recent stock pick analysis of mine, I suggested the stock was currently in a breakout position at the apex of a descending triangle and a major breakout move was about to occur. The stock is up 33% since that call.
All though all current analyst estimates rate Nokia as a "Hold," Trefis currently values Nokia at $5/share - 44% below its current price.
Next Earnings Date: April 18, 2013
The Bottom Line
Nokia is a risky investment indeed, but it is currently undervalued. Rumors of upgrades coming could potentially spur the stock even higher. The Lumia 920 has sold out in many stores and with Microsoft's backing, the risk/reward ratio looks positive for this stock.
5. MEMC Electronic Materials, Inc - (WFR)
The Breakdown
MEMC Electronic Materials, Inc. is engaged in the development, manufacture, and sale of silicon wafers. Through SunEdison, MEMC is a developer of solar energy projects. Originally established in 1959 as the Monsanto Electronic Materials Company, a business unit of Monsanto Company, the company is based in St. Peters, Missouri. During the 1970s, MEMC opened a production plant in Kuala Lumpur, Malaysia. Step by step, diameters of wafers were increased to 5 inches. In 1981 MEMC constructed a production and R&D-facility in Japan, specifically in Utsunomiya, as the first non-Japanese corporation. Three years later, the production of 200 mm wafers was started by MEMC on economic scale, with the corporation taking on a pioneering role again.
With the boom of the photovoltaic industry MEMC was able to agree on several long-term contracts for delivery of solar wafers. Starting in 2006 a volume of several billion USD is contracted with Suntech Power.
Analyst Ratings and Analysis
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MEMC has a price-to-book value of 1.86x, low debt-to equity (4.3x) and a gross margin of nearly 14%. Thomas Reuters, MarketEdge and Standard & Poor's all rate MEMC has a buy. Analyst estimates also forecast EPS to increase in subsequent years as depicted above. Management has continued to initiate growth programs over the years under the direction of Emmanuel Hernandez and is committed to make MEMC a widely recognized company.
Next Earnings Date: May 6th, 2013
The Bottom Line
With determined management, strong growth prospects and trading 27% lower than its 52 week high, MEMC is a solid option for any investor looking for a steal.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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