The potential impact of the COVID-19 resurgence on economic recovery is causing volatility in the major stock market indices. Furthermore, the Federal Reserve’s meeting next week and the stock market’s history of weakness in September are making investors cautious.
Amid this uncertainty, low-priced stocks with significant growth potential could be ideal bets versus their overpriced counterparts. In addition, a substantial increase in retail trading activities should help under-the-radar stocks outperform the pricey ones because retail investors tend to dabble in low-priced stocks due to their limited capital and desire to own more shares.
This, along with a low-interest-rate environment, should we think continue to favor financially sound stocks Mechel PAO (MTL), Lifeway Foods, Inc. (LWAY), and RCM Technologies, Inc. (RCMT), which are currently trading at less than $10. These stocks have a ‘Strong Buy’ rating in our proprietary POWR Ratings system.
Mechel PAO (MTL)
Based in Moscow, MTL is a leading mining company with more than 20 production enterprises that produce coal, iron ore, steel, rolled products, ferroalloys, heat, and electric power. The company also owns three trade ports, transport operators, and a sales and service network. In addition, it provides sea, rail, and motor transportation logistics services to third parties.
This month, MTL launched the development of Sivaglinskoye iron ore mining with an approximately two billion rubles ($27.6 million). This iron deposit has a 2.2 square kilometer surface size, with an estimated 21 million tonnes of iron ore reserves for open mining. With this new project, the company is expected to increase its iron ore self-sufficiency by 15 – 20% to 60%.
MTL’s net sales increased 43.1% sequentially to 108.86 billion rubles ($1.5 billion) for its second quarter ended July 31, 2021. The company’s operating profit grew 134.1% sequentially to 30.38 billion rubles ($419.17 million), while its EBITDA rose 84.9% to 33.73 billion rubles ($465.38 million). Also, the company’s profit increased 202.8% sequentially to 23.91 billion rubles ($329.9 million).
A $4.64 billion consensus revenue estimate for its fiscal period ending December 2021 represents a 28.9% increase year-over-year. Furthermore, the stock has gained 132.4% over the past nine months and 156.4% over the past year to close yesterday’s trading session at $4.23.
MTL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Also, the stock has an A grade for Momentum, Growth, and Quality. We’ve also graded MTL for Stability, Sentiment, and Value. Click here to access all MTL’s ratings. MTL is ranked #7 of 33 stocks in the A-rated Steel industry.
Note that MTL is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
Lifeway Foods, Inc. (LWAY)
Incorporated in 1986, LWAY is a probiotic and nutritious food provider. It produces kefir, organic kefir, grassfed, biokefir, probugs, and cheese. The Morton Grove, Ill.-based company sells its products under the Lifeway and Fresh Made brand names and under private labels on behalf of customers primarily through a direct sales force, brokers, and distributors.
Last month, LWAY acquired the California-based probiotic drinkable yogurt brand GlenOaks Farms, Inc. With this acquisition, LWAY will gain regional strength in the West to accompany its Fresh Made brand in the East. This transaction should boost LWAY’s R&D, transportation, and operational benefits.
For the second quarter, ended June 30, 2021, LWAY’s net sales increased 16.6% year-over-year to $29.16 million. The company’s gross profit grew 10.8% from its year-ago value to $7.68 million. Its income from operations rose 73.4% from the prior-year quarter to $2.49 million. Also, the company’s net income increased 65.1% year-over-year to $1.62 million.
LWAY’s EPS is expected to grow at a 10% rate per annum over the next five years. Over the past three months, the stock has gained 8% in price to close yesterday’s trading session at $5.67.
LWAY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Growth, and grade B for Quality and Sentiment.
In addition to the POWR Rating grades we’ve just highlighted, one can see LWAY’s ratings for Value, Stability, and Momentum here. The stock is ranked #4 of 49 stocks in the B-rated Food Makers industry.
RCM Technologies, Inc. (RCMT)
RCMT is a San Diego, Calif.-based provider of business and technology solutions designed to enhance and maximize the operational performance of its customers through the adaptation and deployment of advanced engineering and information technology services. The company also offers specialty healthcare services. It operates through three segments: Engineering; Information Technology; and Specialty Health Care Services.
In July, RCMP completed an Engineer-Procure-Construct (EPC) project, which involved installing a new high-voltage substation for a major U.S. utility. The company can provide its clients innovative and safe solutions with integrated designs and construction tools and processes through this project.
RCMT’s revenue increased 49.9% year-over-year to $48.93 million for the second quarter, ended July 3, 2021. Its gross profit grew 44.3% from its year-ago value to $12.27 million. Its operating income was $1.94 million for the quarter, versus $1.17 million operating loss in the second quarter of 2020. Also, the company’s net income came in at $1.26 million, compared to a $992,000 net loss in the prior-year quarter.
Analysts expect RCMT’s revenue to increase 21.6% year-over-year to $182.96 million in its fiscal year 2021. The company has an impressive earnings surprise history; it beat the consensus EPS estimates in three of the trailing four quarters. Its EPS is expected to increase 143.8% in the current year. RCMT’s stock has surged 366.3% in price over the past nine months and 439.7% over the past year to close yesterday’s trading session at $7.88.
It’s no surprise that RCMT has an overall A rating, which equates to a Strong Buy in our POWR Rating system. Also, the stock has an A grade for Growth, and a B grade for Sentiment and Quality.
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MTL shares were trading at $4.13 per share on Friday morning, down $0.10 (-2.36%). Year-to-date, MTL has gained 101.46%, versus a 19.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Priyanka Mandal
Priyanka is a passionate investment analyst and financial journalist. After earning a master's degree in economics, her interest in financial markets motivated her to begin her career in investment research. More...
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