In this piece, we will take a look at 12 best growth stocks under $10. If you want to skip a primer on growth and want to jump to the top five stocks in the list, then head on over to 5 Best Growth Stocks Under $10.
One way to categorize stocks is through their price to earnings ratio. The P/E ratio provides an easy way to rank companies with their profitability and market sentiment and factor in analysts or other projections as well. There are two kinds of P/E ratios, namely trailing and forward P/Es. These either use the target company’s existing earnings per share or projected earnings per share that can be calculated by factoring in future market size, sales, cash flows, debt, and other factors. Depending on the value of a firm’s stock relative to these different EPS figures, a stock can be classified as either a growth stock or a value stock.
Both of these have their merits when it comes to investing. This value depends on whether the broader investing climate, a.k.a. the economy is performing well or slowing down. Growth stocks, which have higher P/E ratios, do well in a robust economic environment, while value stocks are thought to be more resilient to economic downturns. As an example, 2022 was one of the worst years on the stock market in recent market history, and it came only two years after the market was first dealt a shock from the coronavirus pandemic and then saw the losses reverse by 2021 end. Marked by the Russian invasion of Ukraine and a high inflationary environment, investors fled away from the higher speculation in the market and as a result, growth stocks in particular were dealt heavy blows.
Since these stocks also include some of the biggest companies in the world, such as Tesla, Inc. (NASDAQ:TSLA) and Meta Platforms, Inc. (NASDAQ:META), a fall in their value also drags broader indexes down as well. Keep this in mind when you consider that in 2022, the S&P 500 Growth index tumbled by a strong 30% as major technology companies saw their revenues drop. However, during the same time, the S&P 500 Value index shed a mere 7.3% – confirming the fundamental difference between growth and value stocks and how their performance relates to the economy.
But why are firms with high P/E ratios called growth stocks? This is due to the simple fact that investors pay a higher premium for their business operations, as they look at the potential of the firm’s market and the capability of its operations to capture the market. Therefore, the share price is significantly higher than the EPS, which in turn drives up the P/E ratio.
Looking at the current state of the U.S. economy and how it might play out for growth stocks, the jury’s still out. As July ends, it appears that the inflationary wave in America is dropping faster than in other advanced economies, and at the same time, the economy is also growing. However, despite this, the fact that interest rates are at record high levels will hamper economic growth and one question that needs to be on everyone’s mind is whether the economy will slow down significantly to force the Federal Reserve to cut interest rates fast. Economic data is after all only a state of the past, but on a positive note, most S&P 500 firms that have reported earnings in July have met or exceeded analyst estimates.
Taking a look at FactSet’s earnings update for the three weeks ending on July 21st, 18% of all the firms in the S&P 500 index had reported their earnings as of date. Out of these, 75% have reported EPS above analyst estimates – which is lower than the five year average of 77% but higher than the ten year average of 7.3%. Looking at the amount with which those beating estimates have surpassed them, the data shows that the EPS is 6.4% above estimates on average, which is lower than the five year average of 8.4% but in line with the ten year average. Profitability wise, communications services, information technology, healthcare, and real estate see all companies beat estimates. However, on the revenue front, which actually measures the size of their markets, all communications services firms have missed estimates and only 50% of the real estate companies have beaten them. A slowdown in communications has been feared before the earnings hit the news waves, and it has been evident throughout this year as firms deal with an inventory glut.
With this backdrop, let’s take a look at some affordable growth stocks that are priced under $10. Out of these, the top picks are PlayAGS, Inc. (NYSE:AGS), DISH Network Corporation (NASDAQ:DISH), and Sibanye Stillwater Limited (NYSE:SBSW).
Our Methodology
To compile our list of the best growth stocks under $10, we used market capitalization, trailing P/E, forward P/E, and five year average sales growth to select the forty most valuable firms that have a high forward P/E, a trailing P/E greater than zero, and positive five year revenue growth. Out of these, the top 12 with the most hedge fund investors in Q1 2023 were picked, and these are part of our list of the 12 best growth stocks under $10.
12 Best Growth Stocks Under $10
12. TransAct Technologies Incorporated (NASDAQ:TACT)
Number of Hedge Fund Investors in Q1 2023: 6
TransAct Technologies Incorporated (NASDAQ:TACT) is a computer hardware company that sells printers for specific use cases such as printing receipts. After being negative for a couple of years, the firm’s price to forward earnings ratio is finally in positive territory, with the latest reading sitting at 19.92.
During this year’s March quarter, 13 of the 943 hedge funds part of Insider Monkey’s database had bought TransAct Technologies Incorporated (NASDAQ:TACT)’s shares, with Michael Braner, Daniel Friedberg, and Anil Shrivastava’s 325 Capital being the largest investor courtesy of one million shares worth $6.2 million.
TransAct Technologies Incorporated (NASDAQ:TACT) joins DISH Network Corporation (NASDAQ:DISH), PlayAGS, Inc. (NYSE:AGS), and Sibanye Stillwater Limited (NYSE:SBSW) in our list of top growth stocks under $10.
11. Materialise NV (NASDAQ:MTLS)
Number of Hedge Fund Investors in Q1 2023: 6
Materialise NV (NASDAQ:MTLS) is a technology company that provides 3D printing and associated services. Its forward P/E ratio is a high 625 and the ten year average revenue growth rate is 14.65%. The shares are rated Strong Buy on average based on recent analyst coverage.
Insider Monkey’s Q1 2023 survey covering 943 hedge funds revealed that six had held a stake in Materialise NV (NASDAQ:MTLS). Out of these, the firm’s largest shareholder is Catherine D. Wood’s ARK Investment Management with an investment worth $12.6 million.
10. AXT, Inc. (NASDAQ:AXTI)
Number of Hedge Fund Investors in Q1 2023: 9
AXT, Inc. (NASDAQ:AXTI) is a backend semiconductor firm that provides substrates that are used to make products for different technology sectors such as IoT and data center communications. Its current price/forward earnings ratio is 13.62 along with a positive ten year revenue growth rate of 4.79%.
As of March 2023, nine of the 943 hedge fund portfolios studied by Insider Monkey had invested in the company. AXT, Inc. (NASDAQ:AXTI)’s largest shareholder is none other than the small cap guru Chuck Royce’s Royce & Associates with a stake of $4.9 million.
9. Global Medical REIT Inc. (NYSE:GMRE)
Number of Hedge Fund Investors in Q1 2023: 9
Global Medical REIT Inc. (NYSE:GMRE) is a real estate investment trust that deals with healthcare properties. 27 analyst notes have covered its stock between April and July, leading to a Buy rating on average and 13 total Strong Buy Ratings.
Insider Monkey took a look at 943 hedge fund portfolios for this year’s first quarter and discovered that nine had held a stake in Global Medical REIT Inc. (NYSE:GMRE). Out of these, the largest shareholder is Jim Simons’ Renaissance Technologies with a $2.4 million investment.
8. Empire State Realty Trust, Inc. (NYSE:ESRT)
Number of Hedge Fund Investors in Q1 2023: 10
Empire State Realty Trust, Inc. (NYSE:ESRT), as the name might have led you to guess, is the real estate investment trust that owns New York City’s Empire State Building. The firm’s second quarter of 2023 earnings saw its fund from operations (FFO) beat analyst estimates but drop by 10% annually in a slow real estate environment.
By the end of this year’s first quarter, ten of the 943 hedge funds part of Insider Monkey’s database had invested in the firm. Empire State Realty Trust, Inc. (NYSE:ESRT)’s biggest investor in our database is Mason Hawkins’ Southeastern Asset Management since it owns $53 million worth of shares.
7. Quipt Home Medical Corp. (NASDAQ:QIPT)
Number of Hedge Fund Investors in Q1 2023: 10
Quipt Home Medical Corp. (NASDAQ:QIPT) is a medical devices company that sells products such as masks, beds, and nebulizers. The stock is rated Strong Buy on average and analysts have penned in a nice $5 share price upside.
Ten of the 943 hedge funds polled by Insider Monkey for their Q1 2023 shareholdings had held Quipt Home Medical Corp. (NASDAQ:QIPT)’s shares. Adam Morgan’s Velan Capital is the largest shareholder with a stake of $5.6 million.
6. DouYu International Holdings Limited (NASDAQ:DOYU)
Number of Hedge Fund Investors in Q1 2023: 13
DouYu International Holdings Limited (NASDAQ:DOYU) is a Chinese technology company that provides an online entertainment platform. A discretionary income stock, its fortune is also tied to the Chinese economy, and while the five year average revenue growth rate is positive, it fell in 2022 and in the latest quarter.
After digging through 943 hedge funds for their March quarter of 2023 portfolios, Insider Monkey discovered that 13 had bought and owned the firm’s stock. DouYu International Holdings Limited (NASDAQ:DOYU)’s biggest investor in our database is Seth Fischer’s Oasis Management with a $15.3 million stake.
PlayAGS, Inc. (NYSE:AGS), DouYu International Holdings Limited (NASDAQ:DOYU), DISH Network Corporation (NASDAQ:DISH), and Sibanye Stillwater Limited (NYSE:SBSW) are some top growth stocks under $10.
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Disclosure: None. 10 Best Growth Stocks Under $10 is originally published on Insider Monkey.