With the surge in artificial intelligence names and the tech industry, traders are looking for the next big thing. Sometimes, though, the best place to hunt is in companies that are currently off the radar, such as these sleeper stocks under $10. When trading interest picks up, oftentimes folks will look to affordable sleeper stocks to buy for the best opportunities. With that in mind, these are seven high-potential stocks under $10. These companies have solid business models and improving business prospects but are currently out of favor with the market. As such, take a look at these best cheap stocks now before they rise.
JetBlue Airlines (JBLU)
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JetBlue Airlines (NASDAQ:JBLU) is one of America’s largest airlines. It has a hybrid business model using many low-cost carrier tactics while offering a premium service focusing primarily on serving a few key cities and tourist markets. Unlike the legacy carriers, JetBlue has carved a space for itself with superior point-to-point route coverage. It is primarily focused on East Coast markets, along with the Caribbean. Since the pandemic, JetBlue has moved more heavily into the transatlantic market, offering a number of new U.S. to Europe routes.
In theory, JetBlue shares should be cleared for liftoff, given the record air traffic volumes we’re now seeing. However, JBLU stock is down by a third over the past year. Part of that is due to a high level of uncertainty around a proposed merger with Spirit Airlines (NYSE:SAVE). Setting that aside, however, JetBlue is now selling for less than 10 times forward earnings. And with oil having fallen significantly since last year, JetBlue should enjoy favorable tailwinds in jet fuel pricing as well.
Elanco Animal Health (ELAN)
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Elanco Animal Health (NYSE:ELAN) is a leading company in the animal medicines and therapies space. It makes vaccines, antibiotics, parasite-killers, and many other such drugs and therapeutic products for animals. The company went public in 2018 at around $35 per share. Unfortunately, it has not fared well since then. Elanco shares returned to their highs in 2021 amid the animal adoption boom, but shares have since collapsed in value, falling roughly 75% from their peak. Much of this appears to be driven by sentiment, rather than underlying business results. Elanco had $3.1 billion in revenues in 2018. Analysts project that the firm will make $4.3 billion in revenues in 2023.
Elanco is highly profitable and is trading for just 11 times forward earnings. It appears that investors have dumped companies related to pet care and wellness as the pandemic-related adoption boom has ended. That said, Elanco doesn’t deserve to be in the doghouse given its strong and improving underlying performance.
Petco Health and Wellness (WOOF)
Petco Health and Wellness (NASDAQ:WOOF) is a different way to play the growing pet care market. While the recent pet adoption trends haven’t been favorable, investors shouldn’t lose sight of the bigger picture. Overall, Americans have shown a trend toward having fewer children and, instead, more pets. The pandemic temporarily tipped the scale toward even higher pet adoption rates. Once that temporary effect passes, however, the industry should return to more steady growth.
And it’s not like operating results for Petco are particularly bad. The company just reported another quarter of better-than-expected earnings and revenue growth. More broadly, Petco has grown sales for 18 consecutive quarters. While pet care trends have slowed down since 2021, Petco is still in fine health now. And with the sell-off over the past year, shares now go for less than 20 times forward earnings.
Mister Car Wash (MCW)
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Mister Car Wash (NYSE:MCW), formerly known as Hotshine Holdings, is a chain of car wash locations across the United States. The company launched its IPO in 2021. With MCW stock debuting at around $20 per share, the valuation was much too rich, and shares have dropped dramatically. However, the bull case for Mister Car Wash stock is now shining more brightly. While the stock is down 60% from its 2021 price, Mister Car Wash is growing rapidly. Revenues are up from $630 million in 2019 to an estimated $938 million in 2023.
The company also reached profitability. Analysts peg the stock at 26 times this year’s estimated earnings, and less than 19 times estimated 2025 earnings. Long story short, there’s a solid and scalable business model here. MCW stock initially was overhyped, sure. But with shares now under $9 each, it’s time for investors to give this company a second look.
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Paysafe (NYSE:PSFE) is a payments company focused on online solutions such as digital wallets. The company came public via a SPAC and has had a horrible run of it since then. Shares are down more than 90%; even with a reverse split, PSFE stock has fallen below the $10 threshold once again.
Blackstone (NYSE:BX) and CVC Capital Partners previously took Paysafe private in 2017 for about $3.9 billion. Today, Paysafe has a market capitalization of $600 million and a total enterprise value of less than $3 billion. This suggests that Paysafe is worth much less today than it was worth more than five years ago when private equity bought the whole company.
This seems like a grave miscalculation on the market’s part. Paysafe’s revenues have grown from $1.1 billion in 2018 to an estimated $1.6 billion this year. The company is strongly profitable on an EBITDA and cash flow basis and is projected to return to profitability on an earnings-per-share basis this year as well. Paysafe is a former SPAC and is being punished as such. It’s also in the payments industry and thus is caught up in the storm as companies like PayPal (NASDAQ: PYPL) have seen their share prices collapse. But at this price, PSFE stock looks like a classic baby that’s been thrown out with the bathwater.
Select Water Solutions (WTTR)
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Select Water Solutions (NYSE:WTTR) is focused on water usage and recycling. The company’s mission is simple. As fracking has taken off, oil companies need far more water to operate their wells. Fracking uses more water than other types of oil production. To that point, within the Permian Basin, produced water has grown from 2.7 billion barrels in 2016 to 7.0 billion barrels in 2022. This is estimated to grow to 9.0 billion barrels by 2025.
Water recycling has grown within the Permian, but not at the same rate as usage. Select Water aims to fix this with its proprietary water and chemical solutions for oil operators. Select’s business is diversified with 58% of revenues coming from water services, 23% from chemicals, and 19% from water infrastructure.
Why is WTTR stock an opportunity today? The recent dip in the oil market has caused investors to lose interest in energy stocks. Select shares have slid from $9 in February to around $7.50 now. This puts Select stock at less than 8x forward earnings. This creates a value-buying opportunity; shares could surge if and when the oil market heats back up.
Brookline Bancorp (BRKL)
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The banking crisis has knocked a lot of regional banks under the $10 mark. Of these, Brookline Bancorp (NASDAQ:BRKL) is one of the most attractive. Brookline was founded way back in 1871 and is headquartered in Boston. As you might expect for a firm that has been in business for more than 150 years, Brookline has a conservative business strategy and has shown steady and measured growth over the years. Since 2013, for example, earnings per share has nearly tripled amid a slow but consistent growth model along with rising profit margins.
Brookline is well-positioned for the current banking environment. Its deposit base is up, in large part thanks to a recent acquisition, which shelters it from the bank-run phenomenon that has hurt other banking institutions. And Brookline has benefitted from rising interest rates with financial metrics such as return on equity which have improved in recent years. Regardless of all the positives, BRKL stock is down nearly 40% over the past year amid the exodus from all things related to banking. That’s a mistake. Shares now sell for less than 8x forward earnings and offer a 6.2% dividend yield.
On the date of publication, Ian Bezek held a long position in ELAN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.
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