7 Best Cheap Stocks Under $10 to Buy in July
Lately, equity markets have favored value investors. The past few months have been painful for growth investors. High-priced growth games have dropped drastically. For value investors, though? With the market downturn, many stocks have fallen to very cheap valuations. So you can find great cheap stocks at less than $10 per share.
There are plenty of names at single-digit price points that aren’t just cheap on an absolute basis – they’re also cheap in terms of a multiple of their current earnings.
Yes, with a low forward price/earnings (P/E) ratio only is not a reason to buy a stock. Sometimes stocks that look cheap on paper can turn out to be value traps.
However, there’s plenty to suggest that won’t be the case with these seven names. Each of these cheap stocks under $10 per share is trading at a low valuation, and has catalysts in play to potentially send them back at higher prices. While this valuation gap remains, consider each one a buy.
|BOW||ARC Document Solutions||$2.59|
|CNTY||Casinos of the Century||$7.24|
|DXLG||Destination XL Group||$3.65|
|GEO||The GEO group||$6.41|
|TSQ||Town Square Media||$8.47|
ARC Document Solutions (ARC)
ARC Document Solutions (NYSE:BOW) provides printing services for the construction industry. From late 2020 to early 2022, this stock, hit hard at the start of the pandemic, made a meteoric comeback.
Since then, however, the ARC action has struggled. Since the beginning of the year, it has fallen by more than 26%. One likely reason is the company’s heavy exposure to construction. A slowdown in this space due to rising interest rates could have a serious impact on future results. However, it is possible that the market was too “prepared for impact” here.
The shares are trading today at a valuation that strongly discounts its expected future earnings. The stock is currently trading at around 11 times earnings. ARC also has a forward dividend yield of 7.8%.
If you’re looking for an old-school value stock, this may be a great choice. Whether it’s a price rebound or its dividends, holding ARC shares in your portfolio could deliver strong returns.
Casinos of the Century (CNTY)
Casinos of the Century (NASDAQ:CNTY) is another one of the cheap sub-$10 stocks I talked about earlier. At the end of May, I explained why this game title had not one, but two upward paths.
First, there is upside potential from its latest casino acquisition. Earlier this year, he closed his deal for the Nugget Casino, located just outside of Reno, Nevada. Century’s specialty is buying existing low-value gambling properties and then improving their profitability. Management has a plan to do just that with the Nugget.
Second, CNTY stock could rise significantly in the long run through the multiple expansion. The shares are trading at a much lower valuation than its peers. Even a modest level of multiple expansion could push stocks to much higher prices.
With recession risk looming, it’s understandable that you’re hesitant to get into gaming stocks today. Still, if you think the market is overreacting, consider buying this stock.
Cricut Inc. (CRCT)
Since its initial public offering (or IPO) in March 2021, Cricut (NASDAQ:CRCT) has gone from a high-flying pandemic game to a value stock in disfavor. Shares of the company, well known for its connected devices used in arts and crafts, have fallen about 79% in the past 12 months.
Even at today’s prices, a large portion of the outstanding float (17.6%) of CRCT shares remains sold short. The short side continues to bet big that the fortunes of the company will reverse due to slowing growth as well as inflationary pressures.
That said, despite a less rosy outlook compared to a year ago, you might want to go against the grain on Cricut. The title now sports a very low valuation of 12x. This can more than offset the risks.
Following his massive downfall, he can also now be a takeover target. For example, Cricut could be a great complementary acquisition for the sewing and printing giant. Brother Industries (OTCMKTS:BRTHY).
Destination Group XL (DXLG)
Destination XL Group (NASDAQ:DXLG) is a clothing retailer for big and tall men. After having an incredible run in 2021, shares have sold off significantly in 2022. Although she has been posting strong results lately, investors are worried about how her fortunes have changed over the year at come.
There are many fears that an economic downturn could bring its sales back to the previous year’s levels. Not to mention that there are fears it could revert to reporting net losses, after returning to profitability the previous year.
However, it is possible that the fear is exaggerated with DXLG stocks.
Shares of Destination XL are trading at sell-off prices. The stock has a forward P/E ratio of 5.7x. With future results greatly reduced, the bar is set low. If DXLG manages to post better than expected numbers, the stock could rebound significantly.
Vaalco Energy (EGY)
If you think oil prices will stay high, Vaalco Energy (NYSE:EGY) is one of the best cheap stocks under $10. Currently trading at around $6.58 per share, this independent oil and gas exploration and production (E&P) company could make another big run, if crude oil remains at triple-digit levels.
At least that’s the takeaway with EGY stock, a single-digit stock that trades at a single-digit price-to-earnings ratio (2.7x). If oil prices remain high over the coming year, it’s hard not to see equities benefiting from even moderate multiple expansion.
Many E&P stocks trade at a low multiple, but few trade as low as Vaalco. This is especially true given that the company, with its production assets primarily in West Africa, does not have the political risks seen with other E&P names, such as Great Tiera (NYSE:EWG).
Geographic Group (GEO)
Geographic group (NYSE:GEO), remains a large piece against the current. Shares of the private prison operator have been trading at depressed levels since 2021, when an executive order from President Joe Biden’s administration was seen as the beginning of the end for the controversial industry.
Whether this is really the case remains to be seen. As I discussed last year, phasing out private federal prisons does not equate to “game over” for GEO stocks. State and local contracts, as well as Immigration and Customs Enforcement (ICE) contracts could offset the loss of Federal Bureau of Prisons and US Marshals contracts.
Geo Group currently has a forward valuation of 5.5x. While the stock may continue to trade sideways, as uncertainties surrounding private prisons dissipate, the stock could rebound to prices well above current price levels. Consider it a buy…even if it’s no longer a Michael Burry stock.
Townsquare Media (TSQ)
If you’re looking for a “value as its own catalyst” type of game, Town Square Media (NYSE:TSQ) can make an excellent choice. The media company owns 322 radio stations in 67 local markets.
It goes without saying that radio is a mature industry. An economic downturn could also affect demand for radio ads.
With all of this in mind, why buy TSQ shares? As is the case with many cheap stocks mentioned above, the market can focus too much on the negatives and little on the positives. A downturn could have less impact on future earnings than what is expected today.
Based on its current valuation (approximately 6.7x), this is another situation where just having “better than expected” numbers could cause TSQ shares to rise sharply. A stock that could rise if its valuation normalizes, value investors should add it to their watch lists.
At the date of publication, Thomas Niel held a long position in GEO. He did not hold (neither directly nor indirectly) any position in the other securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.