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2 Profitable Companies With Stocks Trading Under $5 to Buy Today

Many investors think that stocks trading under $5 are bargains, but this is not the case by any means. Oftentimes, a stock has fallen to those levels because of a weak financial performance by the company, or because it has flooded the market with too many of its shares.

One way to find a true bargain is to look for the stocks of companies who are profitable and trade at inexpensive valuations compared with their five-year averages. To make things even easier, I have found two stocks that meet these criteria perfectly, so let’s take a closer look at each companies’ first-quarter earnings results and their stocks’ valuations to determine which would fit best your portfolio.

Bombardier Inc.

Bombardier Inc. (TSX:BBD.B) is one of the world’s leading manufacturers of planes and trains. In the first quarter of fiscal 2015, its adjusted net income increased 12.6% to $170 million, its adjusted earnings per share increased 12.5% to $0.09, and its revenue increased 1% to $4.4 billion. At today’s levels, the company’s stock trades at just 10.6 times fiscal 2015’s estimated earnings per share of $0.23, which is inexpensive compared with its five-year average price-to-earnings multiple of 11.5.

Semafo Inc.

Semafo Inc. (TSX:SMF) is a Canadian-based mining company with gold production and exploration activates in West Africa. In the first quarter of fiscal 2015, it reported an adjusted net profit of $8.21 million, or $0.03 per share, compared to an adjusted net loss of $12.83 million, or $0.04 per share, in the year-ago period, as its revenue increased 92.4% to $74.02 million. At today’s levels, the company’s stock trades at 25 times fiscal 2015’s estimated earnings per share of $0.15 and just 20.8 times fiscal 2016’s estimated earnings per share of $0.18, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 25.5.

Which of these cheap stocks belong in your portfolio?

Bombardier and Semafo are two of the most attractive stocks trading under $5 in the market. Foolish investors should take a closer look and strongly consider initiating positions in one of them today.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joseph Solitro has no position in any stocks mentioned.

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