A stock price alone does not tell you how cheap or expensive a stock really is. A $ 20 share capital may be much more expensive than a $ 100 share based on earnings, cash flows and growth prospects, even though the price tag is lower.
Still, focusing on cheap stocks can be sensible if you have a small amount for investment. We asked three of our Motley Fool contributors to each discuss a stock exchange deal for less than $ 20. Here's why they say investors should consider Energy Transfer (NYSE: ET) Hanesbrands (NYSE: HBI) and Codexis
A cheap pipeline giant
Matt DiLallo (Energy transfer): Energy Transfer is one of the largest energy infrastructures in North America. It currently transports 30% of all natural gas consumed in the US every day ̵
Despite the huge size, Energy Transfer has a rather declining share price recently trading below $ 15. The low price is mainly due to the number of new shares issued by the company to fund its growth initiatives in recent years. It has provided more than 1 billion new shares alone over the past three years – an almost 150% increase – to help fund expansion projects and acquisitions that have balanced stock prices.
However, these investments have begun to pay dividends where the cash flow zooms over 30% per annum. share during the first quarter alone. As a result, the company generated sufficient cash to cover the high performance dividend of $ 856 million. This trend should continue throughout the year and put the company on track to produce between $ 2.5 billion and $ 3 billion in excess cash by 2019.
Because of this, energy transfer is beginning to fluctuate away from its dilution methods as it now produces enough money to cover the proceeds and invest in a large range of expansion projects. This ability for self-financed growth should help start lifting the weight that keeps the stock price.
Do not investigate this clothing company
Tim Green (Hanesbrands): Shares of basic apparel and active toy manufacturer Hanesbrands have been under $ 20 for almost a year. The stock was trading for more than $ 30 as recently as 2015, but the market has become increasingly pessimistic since then.
This pessimism does not seem to be fully justified. There are risks, including a potential recession, additional charges and more upheaval in the brick industry. But the company has a lot to do for it.
Its core business is interior clothing – underwear, stockings, intimates, for example. Innerwear is replaced more often than other types of clothing, and the consumption rate per. Capital has been stable for the past five years. More importantly, the industry is strong branded and private branded goods account for only 10% of US domestic sales by 2018. The branding imbalance is even stronger online, with 93% of domestic clothing being branded last year.
Hanesbrands also sells active gear. The company's Champion brand has grown rapidly outside large mass market dealers, and it expects Champion to reach 2 billion. Dollars on revenue by 2022. Athletic trend does not seem to fade, so it should continue to grow that part of its business.
Hanesbrands expects to produce non-GAAP (adjusted) earnings per share. $ 1.76 this year in the middle of its management area. With inventory hovering below $ 17, the price-to-earnings ratio is below 10. The company has recently set the growth rate of organic sales by 10% the year before the year in the first quarter. There seems to be a link between the run-down valuation and the company's performance.
Hanesbrands is not an exciting company, but if you are looking for a $ 20 share that can be added to your portfolio, look no further.
Locked and filled with new growth capital
Maxx Chatsko (Codexis): The company started in 2019 on a promising path with few different growth opportunities within reach, but at the end of June it released an investment of 50 million dollars from Casdin Capital to accelerate the necessary capital investment. The private equity purchase almost doubled its cash position from late March, reaching $ 47 million.
The extra funds should be used for the benefit. Codexis has built and tweaked a leading technology platform for engineering enzymes – the small molecules that control life and a lot of other chemistry. Enzymes can be inserted into industrial processes to extract carbon dioxide from flue gas and increase the efficiency of the production of food ingredients, be added to consumer products such as detergents or used for flow diagnostics for clinical and research applications.
The company has done a solid job of diversifying revenues in recent years among pharmaceutical and food production customers, licensing its proprietary software and even licensing a biological drug, the internally developed, currently in Phase 1 trials. In addition to expanding these options, Codexis is committed to upgrading a new range of diagnostic products targeting next generation sequencing (NGS) markets. Although it has received attention from established companies looking for a piece of action, the new capital infusion suggests that the enzyme leader might be interested in building the portfolio itself or owning more of a partner program than previously expected.
No matter how the latest option is pursued, investors need to be tense on the padded balance. Given that Codexis expects to grow by 16% year-on-year in 2019 compared to last year, the new capital is likely to allow double-digit growth by 2020 – and perhaps beyond.