Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts. But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.
The downside that can come from buying these securities is precisely why we started StockStory - to isolate the long-term winners from the losers so you can invest with confidence. Keeping that in mind, here are three stocks under $10 to avoid and some other investments you should consider instead.
Krispy Kreme (DNUT)
Share Price: $5.48
Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world.
Why Is DNUT Not Exciting?
- Cash-burning history makes us doubt the long-term viability of its business model
- Underwhelming return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
At $5.48 per share, Krispy Kreme trades at 17.8x forward price-to-earnings. To fully understand why you should be careful with DNUT, check out our full research report (it’s free).
Janus (JBI)
Share Price: $8.17
Standing out with its digital keyless entry into self-storage room technology, Janus (NYSE:JBI) is a provider of easily accessible self-storage solutions.
Why Does JBI Fall Short?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Projected sales decline of 9.4% over the next 12 months indicates demand will continue deteriorating
- Revenue growth over the past four years was nullified by the company’s new share issuances as its earnings per share fell by 9.4% annually
Janus’s stock price of $8.17 implies a valuation ratio of 21.8x forward price-to-earnings. Check out our free in-depth research report to learn more about why JBI doesn’t pass our bar.
GoodRx (GDRX)
Share Price: $4.73
Founded in 2011, GoodRx (NASDAQ:GDRX) provides a platform allowing consumers to compare prescription drug prices, access discounts, and save on medications through its digital tools.
Why Should You Sell GDRX?
- Annual revenue growth of 1.7% over the last two years was below our standards for the healthcare sector
- Smaller revenue base of $792.3 million means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Push for growth has led to negative returns on capital, signaling value destruction
GoodRx is trading at $4.73 per share, or 11x forward price-to-earnings. Read our free research report to see why you should think twice about including GDRX in your portfolio.
Stocks We Like More
The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.
Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like United Rentals (+322% five-year return). Find your next big winner with StockStory today for free.
