Best Cheap Stocks of March 2024
Company (ticker) | % Below 52-Week High |
---|---|
Axcelis Technologies, Inc. (ACLS) | 35% |
DIGI International Inc (DGII) | 33% |
Addus HomeCare Corporation (ADUS) | 24% |
North American Construction Group LTD (NOA) | 15% |
ExlService Holdings (EXLS) | 15% |
Sterling Infrastructure, Inc. (STRL) | 11% |
Franklin Electric Co., Inc. (FELE) | 10% |
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Axcelis Technologies, Inc. (ACLS)
Trailing 5-Year Annualized EPS
38.9%
Forward 5-Year Annualized EPS Estimate
20.0%
Forward P/E Ratio
17.2
38.9%
20.0%
17.2
Why We Picked It
Axcelis Technologies produces and services equipment used in the production of semiconductors. It currently has the highest yearly forecasted EPS growth on this list.
It has a B financial health rating and has managed to increase sales by 19.1% per year, on average, over the last five years. EPS is expected to grow by 10.3% next year, according to analysts’ estimates.
The stock has fallen significantly from its 52-week high. That has reduced ACL’s P/E ratio to more attractive levels. The current P/E ratio of 16.3 is near the lower end of readings in the last few years.
ACLS is also buying back shares, with a buyback yield of 1.2%.
DIGI International Inc (DGII)
Trailing 5-Year Annualized EPS
2.0%
Forward 5-Year Annualized EPS Estimate
17.0%
Forward P/E Ratio
12.7
2.0%
17.0%
12.7
Why We Picked It
DIGI provides a wide range of wireless communication related services and products.
It has a solid B financial rating from Morningstar. And it is expected to grow earnings by 11.0% next year. Sales have increased an average of 14.4% per year over the last half decade.
This stock rarely trades below a P/E of 30. That makes the stock attractively priced at its current forward P/E ratio below 11.
A significant fall from the 52-week high has helped produce those cheaper valuation levels compared to recent norms.
Addus HomeCare Corporation (ADUS)
Trailing 5-Year Annualized EPS
21.7%
Forward 5-Year Annualized EPS Estimate
15.0%
Forward P/E Ratio
18.3
21.7%
15.0%
18.3
Why We Picked It
Addus provides in-home care services to those who are chronically ill, disabled or elderly. Morningstar gives it a B financial health grade.
Sales have been increasing by an average of 16% per year over the last five years, and analysts expect EPS growth of 8.9% next year.
The current P/E of 24.6 is a low reading for this stock. P/E values have ranged between 22.3 and 69.4 over the last five years. The current reading is right near the low end of that range.
The stock price of ADUS has been flat to lower since 2021 and is trading significantly below the 52-week high. This may present a good buying opportunity for the growing company.
North American Construction Group LTD (NOA)
Trailing 5-Year Annualized EPS
33.9%
Forward 5-Year Annualized EPS Estimate
11.0%
Forward P/E Ratio
6.6
33.9%
6.6
Why We Picked It
North American Construction Group is a contractor with a massive fleet of heavy construction equipment. It also refurbishes and maintains construction equipment.
NOA has a B financial rating from Morningstar, and it is expected to grow earnings by 51.6% next year. Sales have increased on average of 19% per year over the last five years.
Its price-earnings ratio and forward P/E ratio already appear low. But this stock typically trades at even lower P/E levels. Over the last five years, its P/E ratio values have ranged between 4.6 and 33.9, spending most of the time below 20. Current values represent a good to fair value for this growing company.
The stock is well below its 52-week high and such pullbacks have generally provided good buying opportunities as the stock is in a decade long uptrend. That said, the stock can experience large price swings both to the upside and downside, due to the cyclical nature of the construction industry.
The company pays a 1.5% dividend and has a buyback yield of 0.8%. Buybacks help bolster shareholder value over time.
ExlService Holdings (EXLS)
Trailing 5-Year Annualized EPS
26.4%
Forward 5-Year Annualized EPS Estimate
15.5%
Forward P/E Ratio
19.1
26.4%
15.5%
19.1
Why We Picked It
ExlService provides automation services, analytics and outsourcing for businesses with the intent to help companies scale and improve efficiency.
The company has an A financial rating from Morningstar, and it is expected to grow earnings by 14.1% next year. Sales have increased on average of 13.5% per year over the last five years.
It’s trading on the cheaper end of P/E ratio values relative to historic norms right now. Over the past five years, values have ranged between 24 and 55. So, the current P/E ratio of 29.5 is at the low end of that range.
The stock is well below its 52-week high. Such a pullback would end up providing a good buying opportunity if the stock resumes its more-than-a-decade-long uptrend.
The company doesn’t pay a dividend, but it does have a buyback yield of 2.1%.
Sterling Infrastructure, Inc. (STRL)
Trailing 5-Year Annualized EPS
32.6%
Forward 5-Year Annualized EPS Estimate
11.0%
Forward P/E Ratio
16.9
32.6%
11.0%
16.9
Why We Picked It
Sterling is a construction company focused on building e-infrastructure such as data centers and warehouses. It also works on transportation—such as roads and bridges—as well as building family homes and concrete foundations.
The company has a C financial rating from Morningstar, and it is expected to grow earnings by 13.1% next year. Sales have increased on average of 13.3% per year over the last five years.
The stock is trading below its 52-week high. Still, STRL’s average annual total return in the past 24 months has been about a high-octane 70% compared to a little more than a plodding 2% for the overall market average in the form of the , according to Morningstar Direct.
Franklin Electric Co., Inc. (FELE)
Trailing 5-Year Annualized EPS
13.1%
Forward 5-Year Annualized EPS Estimate
13.4%
Forward P/E Ratio
22.1
13.1%
13.4%
22.1
Why We Picked It
Franklin Electric sells water and fuel pump systems. It has an A financial health rating from Morningstar, a 1% dividend yield and a 0.7% buyback yield.
Sales have steadily grown at an average rate of 10.4% per year over the last five years. Next year analysts expect 5.8% EPS growth, which is below the average yearly growth expected over the next half decade.
The current P/E ratio of 22.7 is actually a good value for the stock. Over the last five years, its P/E ratio has ranged between 19.5 and 40.7, so 22 is near the bottom of the end of that range. The stock is below its 52-week high. However, the stock has been in an uptrend, albeit a choppy one, since 2016.
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*All data sourced from TradeThatSwing.com, current as of February 7, 2024.
Methodology
Our curated list of cheap stocks to buy now is built using strict criteria. The stocks outlined above are traded on U.S. exchanges and meet the following requirements:
- Sustained average annual EPS growth. Each stock on the list has averaged at least 10% yearly EPS growth over the last five years.
- Sustained average annual revenue growth. Chosen stocks have averaged at least 10% sales growth per year over the last five years.
- Sustained year-over-year EPS gains. EPS must be higher than the prior year in each of the last four years.
- No negative earnings in the last four years. While sustained earnings growth is key, profitability is even more important, so no stocks should have seen negative EPS in the past four years.
- Sustained growth seen in forward EPS estimates. Average analyst estimates for annual EPS growth over the next five years is 10% or greater per year. The current year must also have positive growth above 0%.
- A recent price drop. The stock must be trading at least 10% below its 52-week high.
- Fair valuation. Price/Earnings ratio must be below 50 and the Forward P/E ratio must be below 25. While what an acceptable P/E ratio is varies based on industry and growth prospects of a company, this metric helps eliminate stocks at extreme valuations.
- Financial strength. All the companies have at least a C financial rating or higher from Morningstar.
These criteria aim to uncover stocks that have been growing their earnings and revenue and are expected to continue growing these key metrics. While analyst estimates aren’t always accurate, they provide a handy measure of consensus expectations—and stocks often move based on their expectations.
When buying the dip, consider when you will purchase and when you will exit, whether the stock drops or rises. It is unknown how far a stock will drop before it recovers or whether it will continue to trend higher in the future.
To learn more about our rating and review methodology and editorial process, check out our guide on how Forbes Advisor rates investing products.
Please note that the stocks above were selected by an experienced financial analyst, but they may not be right for your portfolio. Before you decide to purchase any of these stocks, do plenty of research to ensure they are aligned with your financial goals and risk tolerance.
How To Find Cheap Stocks
The best way to find cheap stocks is by using a stock screener. There are some free options as well as many more paid options available for stock screeners online.
After determining the best stock screener for your purposes, you’ll want to enter the parameters for the stocks you want to buy. These parameters, of course, will be of your own choosing. If you’re looking for a place to start, you can use the parameters we set forth above.
The most important thing when screening for cheap stocks, however, is to make sure that the companies you choose are good investments with solid financials and the potential for future growth.
Where To Buy Cheap Stocks
You can buy cheap stocks on any of the major stock exchanges. To do so, you will need to open a brokerage account, fund the account and do your due diligence.
Cheap stocks can be volatile investments. It’s often recommended to consult a financial advisor before making any final decisions.
Alternatives To Buying Cheap Stocks
There are alternatives to buying cheap stocks. Many brokerages offer the opportunity to buy fractional shares.
Fractional shares are pieces of stock that are available for individual purchase. Rather than investing in a certain number of shares, you can choose to invest a certain amount of money instead. For example, if a given stock is trading at $1,000 per share, you could buy a fraction of that stock for only $100.
You’ll want to check with your individual brokerage to determine if it offers the opportunity to buy fractional shares and what the minimum investment in fractional shares may be.
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