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.
These dynamics can cause headaches for even the most seasoned professionals, which is why we started StockStory - to help you separate the good companies from the bad. That said, here are three stocks under $50 to avoid and some other investments you should consider instead.
Yum China (YUMC)
Share Price: $42.73
One of China’s largest restaurant companies, Yum China (NYSE:YUMC) is an independent entity spun off from Yum! Brands in 2016.
Why Does YUMC Give Us Pause?
- The company has faced growth challenges as its 5.5% annual revenue increases over the last seven years fell short of other restaurant companies
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new restaurants
- Gross margin of 20.3% reflects the bad unit economics inherent in most restaurant businesses
Yum China is trading at $42.73 per share, or 13.2x forward P/E. Read our free research report to see why you should think twice about including YUMC in your portfolio.
Kennametal (KMT)
Share Price: $29.14
Involved in manufacturing hard tips of anti-tank projectiles in World War II, Kennametal (NYSE:KMT) is a provider of industrial materials and tools for various sectors.
Why Are We Cautious About KMT?
- Sales trends were unexciting over the last five years as its 5.1% annual growth was below the typical industrials company
- Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
- Free cash flow margin dropped by 7.6 percentage points over the last five years, implying the company became more capital intensive as competition picked up
At $29.14 per share, Kennametal trades at 6.2x forward P/E. Dive into our free research report to see why there are better opportunities than KMT.
Silgan Holdings (SLGN)
Share Price: $38.55
Established in 1987, Silgan Holdings (NYSE:SLGN) is a supplier of rigid packaging for consumer goods products, specializing in metal containers, closures, and plastic packaging.
Why Do We Pass on SLGN?
- Muted 4.7% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Gross margin of 16.8% reflects its high production costs
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 2.4% annually
Silgan Holdings’s stock price of $38.55 implies a valuation ratio of 9.8x forward P/E. To fully understand why you should be careful with SLGN, check out our full research report (it’s free).
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