As an investor, you would not only be interested in stocks that have a great growth potential, but also in stocks that are available at highly pocket friendly prices. Low prices and high yield is indeed a dream combination as they promise great returns on cheap investments. The following are some of the best and cheap stocks with incredible growth potential that are up for grabbing right now. These have been classified as clear growth stocks because they have been reporting 10% or more profits for the last few years.
Comfortably “seated”
There have been quite a few companies that have bounced back strongly from the economic depression that rattled the US and other countries during 2008. Lear (LEA, Financial) is one of them. Lear is one of the market leaders in making seats for automobiles and manufacturing on-board electrical systems. It is involved in a sector that is dependent on two important factors – overall economic scenario and the performance of the automobile sector for a particular year or quarter. If these two sectors don’t do well, Lear’s performance too goes for a toss.
However, fortunately during Q3 2014, the US economy had reported a growth of 5% and automobile sector had picked up, thanks to the easy lending norms. All kinds of vehicles (personal, commercial, trucks, SUVs, crossovers) except medium and large sized cars, witnessed increased sales during 2014 as against the units sold during 2013. This reflected in Lear’s performance as well as the company had recorded its career best sales growth rate of 8% (to show $4.2billion) during this quarter as compared to last year. Earnings per share stood at a healthy $1.93, a 33% jump from the values of last year. Wall Street analysts expect this value to go up to $12 by 2017. Margins from electrical segments too have increased for the 5th straight year due to effective cost management strategies. With increased earnings and a forward P/E of just 8, Lear is a highly recommended buy right now. The stock movement of Lear is evident from the below chart
Diverse sources of revenue
Heavy equipment manufacturer and lessor, H&E Equipment (HEES, Financial) is second on the list of high growth stocks. One of the strong points of H&E has been its ability to generate income from a wide range of sources. Leasing out big and heavy industrial equipment like cranes, lift trucks etc. is indeed a profitable business because most of the construction companies do not wish to spend huge sums of investment in buying new machines. H&E earns a majority of its income through this lease business. It also sells new and used machinery to interested sellers and excels in after sales services as well. All these widespread sources of revenue made H&E a profitable unit. The following picture shows the diverse range of services of H&E and its presence in different geographies.
The gross profit of H&E had gone by 33% for Q4 2014 from Q4 2013. Expense management of H&E is very much under control and the business is quite well-managed these days, giving investors lots to cheer about. The yield, performance and quality of services that H&E delivers and expectations of a forward P/E of just 11, make this stock ought to be bought right now. The stock movement of H&E for the last few months are described in the chart below:
Revolution in the prepaid debit card sector
Green Dot (GDOT, Financial), the company that deals in prepaid debit cards and cash processing services has learnt its lesson the hard way. The company had huge piles of cash in its accounts and reported staggering rates of growth year after year. The only and costly mistake that Green Dot did was to rely too much on the retail giant, Wal-Mart (WMT, Financial) for its revenues. The big jolt came some years back when Wal-Mart decided to venture out to different prepaid cash operators other than Green Dot. This created a huge dent on the earnings of Green Dot.
However, it bounced back very quickly from this mess and started to find out other sources of revenue. One of the most successful partnerships for Green Dot after Wal-Mart was with Walgreen Boots Alliance (WBA, Financial). Through this deal, Green Dot cards could be reloaded with cash at around 3000 locations of Walgreen. This huge distribution network helped Green Dot to reach a very profitable position. It slowly distanced itself completely from the operations of Wal-Mart and has gone through this transition phase quite successfully. This deal meant that Green Dot’s EPS increased to $0.36 per share during 2014, a whopping 50% increase from the values of 2014. With a forward P/E of just 11 and with share prices trading at attractive rates currently, this stock is due to give investors long term benefits if bought now. Green Dot’s stock movement is evident from the chart below:
Conclusion
These stocks are currently trading at cheap rates in the market. Given the growth that they are about to witness in 2015, Wall Street analysts are confident that buying these stocks right now will give huge benefits to investors. More often than not, it is these small stocks in a sector that will turn out to be surprise winners.
