How To Pick The Best Stocks Under $10

There are over 2000 stocks trading for less than $10 per share. It’s easy to get suckered into buying a stock just because it’s trading at a low price with the hope that business will take off and the stock will rise. We use a five point formula to sort out the winners from the losers and find the top 100 stocks trading under $10 per share.

5 Year Earnings Per Share Growth Rate

Only stocks that have a positive earnings per share ratio are considered for this list. Positive earnings are good, but companies that are growing their earning ratio each year are better. The 5 year EPS growth rate measures the increase of EPS over the last 5 years.

EBITDA Margin Percentage

EBITDA margin is a true measure of of profit margin. It stands for earnings before interest, taxes, depreciation and amortization. This is compared with total revenue. The higher the margin the better.

ROI TTM

Income after taxes divided by the average (Total Long term Debt + Long term Liabilities + Shareholders Equity), expressed as a percentage for the last twelve months.

Price to Book

Book value is a company’s total assets less it’s total liability’s. It is shown as a per share value. A book value ratio is relative to the share price. A stock that has a book value of 5 might be undervalued if it was trading at $1 per share, but not if it was trading at $10 per share. We use the Price to Book ratio which takes the share price into account. The Price to Book number is the stock price divided by the book value per share. The lower the better.

5 Year Net Income Growth Rate

Net income is pretty easy to understand. We want to invest in companies that have positive net income and are growing their income each year.

Using these data points we created a Top 100 undervalued stock list. The value rating is based on a 100 point scale.