We recently compiled a list of the 10 Best Affordable Stocks Under $5 to Buy Now. In this article, we are going to take a look at where GoodRx Holdings, Inc. (NASDAQ:GDRX) stands against other best affordable stocks under $5 to buy now.
In an interview with CNBC on January 25, Jill Carey Hall, Global Research Head of U.S. Small and Mid-Cap Strategy at BofA, discussed her outlook for the small-cap and mid-cap space. She believes that this year may not be the best for small caps, citing a tough backdrop and disappointing profit growth. According to Hall, the profit growth recovery story that many investors were bullish on last year has continued to get revised down and pushed out further into 2025, resulting in negative year-over-year earnings growth in the small-cap segment.
Hall thinks that mid-caps are a better bet, citing better fundamentals and balance sheets. She notes that if the market broadens out, mid-caps could offer the best risk-reward, especially in an environment where multiple rate cuts have gotten priced out of the market. BofA expects the Fed to stay on hold and not cut rates further, which could pose refinancing risks for small caps. In contrast, mid-caps have better balance sheets and fundamental trends, making them a more attractive option.
READ ALSO: 12 Most Promising Green Stocks According to Hedge Funds and 10 Worst Performing Energy Stocks in 2024.
Despite the optimism around the economy and potential policies from the Trump administration, Hall believes that rates still matter more than anything else. She notes that small caps have underperformed for a decade and are due for an outperformance cycle, but this year may not be the best time to jump back in. Hall thinks that investors are nervous about small caps and need to see a more convincing profit turn and stabilizing rates before becoming more bullish. However, she does see opportunities in domestic mid-caps, particularly those with less leverage, less refinancing risk, and economic sensitivity.
Hall advises being selective in the small-cap space, rather than owning a benchmark. She believes that certain pockets of the market, such as financials, are well-positioned to benefit from the current backdrop, and that owning stocks with rising earnings estimates could be a good strategy. She emphasizes the importance of watching rates and profit growth, and being selective in one’s investments, rather than making broad bets on the small-cap space.
While small caps may face headwinds this year, mid-caps appear to present a more favorable opportunity due to stronger fundamentals and reduced refinancing risks.
A pharmacist assisting elderly customers with their GoodRX codes at a local pharmacy.
Our Methodology
To compile our list of the 10 best affordable stocks under $5 to buy now, we used Finviz and Yahoo stock screeners to identify 25 companies with a forward price-to-earnings (P/E) ratio below 15 as of January 24, and an average analyst-projected earnings growth of at least 8% for the current year. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
GoodRx Holdings, Inc. (NASDAQ:GDRX)
Number of Hedge Fund Holdings: 20
Forward P/E Ratio as of January 24: 13.61
Earnings Growth This Year: 17.14%
Stock Price as of January 24: $4.93
GoodRx Holdings, Inc. (NASDAQ:GDRX) is a leading digital healthcare platform that empowers consumers to access discounts on medications by comparing prices across pharmacies. The company serves millions of users, including individuals without insurance and those looking to lower costs. The company’s platform offers a wide range of services, including prescription price transparency, co-pay assistance, and direct-to-consumer e-commerce solutions.
One of the key areas of focus for GoodRx Holdings, Inc. (NASDAQ:GDRX) is its Pharma Manufacturer Solutions (PMS) offering. This segment has been experiencing significant momentum and has helped pharmaceutical manufacturers reach patients and physicians through innovative programs such as point-of-sale cash discounts, co-pay cards, and patient assistance programs. As of Q3, the company has signed over 72 point-of-sale cash programs, more than doubling the number of deals from the beginning of 2024. These programs not only provide immediate savings to consumers but also benefit manufacturers by driving incremental prescriptions and revenue. GoodRx Holdings, Inc. (NASDAQ:GDRX) e-commerce capabilities, which allow brands to integrate their direct-to-consumer experiences into the platform, further enhance the value proposition for both manufacturers and consumers.
GoodRx Holdings, Inc. (NASDAQ:GDRX) is also expanding its Integrated Savings Program (ISP), which complements health insurance by providing consumers with the lowest possible prices on covered medications. The ISP has been performing well and is expected to launch additional offerings, such as off-formulary brand deals, in early 2025. These programs aim to reduce patient script abandonment and increase the number of filled prescriptions, which can improve the overall economics of retail pharmacies.
Overall GDRX ranks 3rd on our list of the best affordable stocks under $5 to buy now. While we acknowledge the potential of GDRX as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GDRX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
