As interest rates keep rising, sticking with value over growth remains the best move. Amid dozens of value stocks, some of the best value plays out there are cheap stocks under $10 per share.
These undervalued, under-the-radar names are attractive in today’s market for two reasons. First, if rates keep rising, putting pressure on valuations, these stocks, already selling at rock-bottom multiples, have far less room to move lower than many other names.
Second, whenever the market recovers (either because the Federal Reserve defeats inflation or the Fed folds by lowering rates), these names can recover more than the overall stock market. As a Bloomberg commentator recently opined, after a long period of underperformance, value stocks may have plenty of room to climb.
With this in mind, you may want to consider adding a number of these seven cheap stocks under $10 to your portfolio. All of them are severely undervalued, based on their current and future prospects.
Best Cheap Stocks Under $10: Century Casinos (CNTY)
Previously, I have recommended Century Casinos (NASDAQ:CNTY) as a micro-cap value stock with high potential gains. The downturn of gambling stocks has knocked CNTY lower to the tune of 35% so far this year.
While an economic downturn will likely have an impact on the gaming industry, this regional casino operator may not be as hurt as the operators of gaming resorts. And compared to other regional casino stocks, CNTY stock is cheap. The shares trade for 10.2 times its trailing earnings, a far lower multiple than that of its larger peers. For example, Bally’s (NYSE:BALY), trades for 21.6 times earnings.
CNTY also has a positive catalyst, in the form of its strategy of making shrewd acquisitions of gaming properties. As stated in the company’s latest investor presentation, Century has two pending deals that can improve its profitability.
Vaalco Energy (EGY)
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With no end in sight to high fossil fuel prices, energy stocks could continue to outperform the stock market. One way you can play this trend is by buying some cheap stocks under $10 in the energy sector, like Vaalco Energy (NYSE:EGY).
If you’re looking to wager that crude oil prices will remain near multi-year highs, EGY stock is a good name to buy. Why? Vaalco recently closed on a merger with another small energy exploration and production (or E&P) company, TransGlobe.
Assuming tight oil supplies outweigh a recession-driven drop in demand and oil prices hold steady or head higher, this transaction could be extremely profitable for EGY shareholders. One analyst estimates that, largely due to this deal. Vaalco’s earnings per share will nearly double, from 78 cents this year, to $1.80 per share next year,
Evolution Petroleum (EPM)
Along with EGY, another cheap energy stock to consider is Evolution Petroleum (NYSEAMERICAN:EPM). Look EPM up on a stock screener, and right away you can deduce that it is a value play.
EPM stock sells for only 5.3 times its forward earnings, at the low end of earnings multiples for oil and gas stocks. The shares also have a high forward dividend yield of 6.1%. Not only that, but similar to the situation with Vaalco, Evolution’s acquisition strategy may meaningfully raise its stock.
As a Seeking Alpha commentator argued last month, Evolution’s purchase of various oil and gas assets between 2019 and 2022 has started to pay off. High energy prices have resulted in a big jump in profitability for these assets. The company can put this increased cash flow to work paying down debt. It could also signal that EPM can maintain and possibly grow its dividend.
Best Cheap Stocks Under $10: Geo Group (GEO)
After surging last summer, on news of investor Michael Burry (of “The Big Short” fame) making Geo Group (NYSE:GEO) his only stock, GEO has held steady in recent months. However, don’t take this to mean that the shares have peaked.
This private- prison operator’s turnaround is only starting to take shape. As discussed in Geo’s latest quarterly earnings release (which was released on Oct. 27), the company made major progress in its deleveraging efforts, by paying down its debt using its cash flow and asset sales.
As this restructuring continues, GEO stock, still sporting a dirt-cheap forward earnings multiple of seven, stands to move substantially higher on a market re-rating. That said, there may also be a chance for this stock to zoom much sooner. As InvestorPlace columnist Josh Enomoto pointed out in September, a “red wave” in the 2022 midterm elections could spark another rally by the shares.
Koss Corporation (KOSS)
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During 2021, Koss Corporation (NASDAQ:KOSS) went “to the moon” and back, a result of this once-obscure consumer-electronics stock briefly becoming a favorite of the “meme stock” crowd. With “meme mania” long since past, KOSS has fallen back to single-digit prices.
It’s a stretch to say that KOSS stock could some day regain its meme high of $64 per share, but the stock could take off again. Instead of a short squeeze, the stock could be boosted by the company’s successful patent-litigation efforts. Back in July, Koss settled its patent lawsuit against Apple (NASDAQ:AAPL). The lawsuit centered around a dispute about wireless-headphone patents
The terms of the settlement were not disclosed. But per its latest 10-Q filing, Koss earned $33 million of “other income,” characterized as “licensing proceeds,” last quarter. Koss still has suits pending with other headphone makers. Similar settlements may follow, potentially lifting the stock which only has a $61.5 million market cap.
Lincoln Educational Services (LINC)
Lincoln Educational Services (NASDAQ:LINC) is a for-profit provider of career training services. The company operates 22 schools in 14 states under various names, including Lincoln Technical Institute.
LINC stock has delivered a mixed performance in recent months. The shares have trended higher recently, but if Lincoln’s upcoming quarterly results and guidance fall short of analysts’ expectations, like they did last quarter, the shares could pull back yet again. So what makes this a cheap stock worth considering?
The company is currently in the middle of a turnaround. Pivoting toward a hybrid in-person/online learning model, and looking to capitalize on the “middle skills” gap in the U.S. labor market, LINC could report significantly better operating results in upcoming quarters.
Analysts’ average estimate calls for earnings per share to rise from 44 cents this year to 63 cents in 2023. That’s likely enough to help send this stock back to double-digit price levels.
Best Cheap Stocks Under $10: Townsquare Media (TSQ)
Townsquare Media (NYSE:TSQ) is one of many radio-broadcasting stocks trading for less than $10 per share. Most radio stocks currently trade at depressed valuations, due to concerns about softening ad-market demand, as well as this mature industry’s limited growth prospects.
However, TSQ sstands out as a radio stock with strong potential to get out of its extended slump. The company has successfully transformed into a more digitally-focused enterprise. Actually, Townsquare’s digital unit is now as large as its radio business.
Furthermore, the fact that Townsquare operates in relatively media markets, where there is less competition for local ad dollars, is another positive trait. TSQ’s earnings could continue to steadily rise, despite it operating in a “dinosaur” industry. In time, Wall Street could catch on and give this deep value stock (trading for just four times its earnings) a higher valuation.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.