The $10-50 price range often includes mid-sized businesses with proven track records and plenty of growth runway ahead. They also usually carry less risk than penny stocks, though they’re not immune to volatility as many lack the scale advantages of their larger peers.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. That said, here are three stocks under $50 to avoid and some other investments you should consider instead.
Bandwidth (BAND)
Share Price: $15
Powering communications for tech giants like Microsoft, Google, and Zoom, Bandwidth (NASDAQ:BAND) provides cloud-based communications software and APIs that enable businesses to embed voice, messaging, and emergency services into their applications and platforms.
Why Is BAND Risky?
- Revenue increased by 13.1% annually over the last three years, acceptable on an absolute basis but tepid for a software company enjoying secular tailwinds
- Estimated sales growth of 4.9% for the next 12 months implies demand will slow from its three-year trend
- Bad unit economics and steep infrastructure costs are reflected in its gross margin of 38.6%, one of the worst among software companies
Bandwidth is trading at $15 per share, or 0.6x forward price-to-sales. To fully understand why you should be careful with BAND, check out our full research report (it’s free).
Zumiez (ZUMZ)
Share Price: $17.19
With store associates called “Zumiez Stash Members”, Zumiez (NASDAQ:ZUMZ) is a specialty retailer of street and skate apparel, footwear, and accessories.
Why Do We Avoid ZUMZ?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Poor expense management has led to operating margin losses
- Falling earnings per share over the last six years has some investors worried as stock prices ultimately follow EPS over the long term
At $17.19 per share, Zumiez trades at 65.3x forward P/E. Dive into our free research report to see why there are better opportunities than ZUMZ.
Ruger (RGR)
Share Price: $34.67
Founded in 1949, Ruger (NYSE:RGR) is an American manufacturer of firearms for the commercial sporting market.
Why Do We Pass on RGR?
- Annual sales declines of 3.9% for the past two years show its products and services struggled to connect with the market
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 14.6% annually while its revenue grew
- Waning returns on capital imply its previous profit engines are losing steam
Ruger’s stock price of $34.67 implies a valuation ratio of 19.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RGR doesn’t pass our bar.
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