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Finding undervalued stocks is one of the key strategies for successful investing. Undervalued stocks are those that trade below their intrinsic value, meaning that the market has not fully recognized their “true potential.” A company’s true potential could lie in its current profitability or future growth prospects. Investors seeking undervalued stocks need to know where to look and must exercise patience. Moreover, not all low-priced stocks are undervalued, as some of them may be cheap for a reason, such as poor performance, weak fundamentals, or high risks. Therefore, investors need to look beyond the price tag and evaluate the quality and growth prospects of the underlying business.
In this article, we will present three stocks that trade below $10 and have strong growth potential in their respective industries.
Companhia Siderúrgica Nacional (SID)
Based in Brazil, Companhia Siderúrgica Nacional (NYSE:SID) is a steel producer and one of the world’s largest integrated iron ore and cement suppliers. However, CSN has struggled in recent years to rekindle growth amidst a cluster of unfortunate macroeconomic events. Inflation and economic stagnation have plagued nations across the globe. It had direct and indirect effects on steel and iron ore demand. According to a World Bank analysis, base metals and iron prices peaked in March 2022 but slid downward after hopes of China’s reopening faded. Lower demand for iron ore and steel harmed CSN’s steel revenues, which declined 4.6% YoY.
The company should benefit from a recovery in global steel prices as China continues to reopen and its economy stabilizes. The steel producer’s shares are valued at 9.4x forward-looking earnings, while the company’s enterprise value trades at 4.3x forward EBITDA. Apart from CSN’s attractive valuation, the company also offers a juicy, annualized dividend yield of 21.3%. An attractive dividend yield and the likelihood of steel prices rebounding should put CSN on the buy list of many investors.
Leafly (NASDAQ:LFLY) is a leading online platform for the burgeoning market of cannabis consumers and businesses in North America. The company provides information, reviews, and recommendations for cannabis products, strains, and dispensaries. Leafly also offers software solutions for cannabis retailers, such as point-of-sale systems, inventory management, and online ordering. It is just under $10 as of writing and may slip out of this range when you read the article.
Leafly is undervalued for a few reasons. For one, the cannabis platform operates in a fast-growing and highly fragmented market, which last year had an estimated total addressable market of $35.8 billion in North America. The Biden Administration’s move to place marijuana off of Schedule I of the Controlled Substances Act to Schedule III. This could drive secular growth tailwinds in the industry for years to come and drive Leafly’s top-line growth. Leafly’s enterprise value is trading at 0.8x forward EBITDA, which creates an attractive entry point for potential investors.
Enfusion (NYSE:ENFN) is a cloud-based software provider for the investment management industry. The company offers an integrated platform that combines portfolio management, order execution, risk analytics, accounting, and reporting functions for hedge funds, asset managers, and family offices. Enfusion also provides several outsourced middle- and back-office services, including trade reconciliation, valuation, and fund administration.
Trading at $8.4 per share, Enfusion remains undervalued with a forward-looking enterprise value-to-sales ratio of 3.9x and enterprise value-to-EBITDA ratio of 20.0x. The software platform for investment managers generates positive net income and operates in an industry with evolving and complex needs. Enfusion had 827 clients across 49 countries at the end of the second quarter and maintained a high net revenue retention rate (NRR) of 115.4%. These features make Enfusion a compelling stock for investors looking for a growing financial software platform.
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On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines