Nvidia stock has surged past US$600 and is edging closer to US$700. Constellation Software stock has surpassed $3,600. All these stocks look so expensive. And they were the ones you saw trading around US$200 (before Nvidia split in 2021) and $1,400. Looking at these stocks, investing looks expensive. But some good growth and dividend stocks are trading below $50 a share and have the potential to grow to a three-digit figure.
Are stocks under $50 worth buying?
Remember, the stock price does not determine the quality of the stock. Do not look at the share price in isolation. Always weigh it against the company’s sales, earnings, valuation of peers, and future growth potential. These are some generic comparison metrics. You can study a stock in length by looking at various other parametres depending on the sector it operates in and the stock type.
Two stocks under $50 new investors can buy confidently
If you are a new investor, price is a factor that will attract you. But to buy stocks confidently, you need to know what to expect from them, their potential, and their risks. When you have a reason for investing in the stock, a dip does not scare you.
Here, I will take you through two stocks to get you started on stock investing.
RioCan REIT
RioCan REIT (TSX: REI.UN) is a retail real estate investment trust (REIT) whose strength lies in three areas:
- Most of its properties are in the Greater Toronto Area, which means high rental income and higher property prices because of limited space for new construction.
- Its third-quarter distribution payout ratio is 60.4% after its slashed dividends in 2021 due to low occupancy during the pandemic. And it intends to keep the payout ratio in the 55-65% range.
- It has a diverse tenant base, with no single tenant accounting for over 5% of its rental income. While it is a strength, it is also a weakness, as the REIT must make a significant effort to keep occupancy levels high.
RioCan stock trades near $18 per share and has an annual yield of 6%, paid in 12 monthly installments throughout the year. You can expect RioCan to give you monthly payouts without any distribution cuts in the next two years. The unit price may remain volatile and fall in the next 12 months if property prices are depressed. However, the unit price will surge when the interest rate falls, and property price starts ascending. And with a high level of immigration in Canadian cities, the rental income will keep coming in.
Nuvei stock
Nuvei (TSX: NVEI) share is trading near $35 as the episode of short-selling significantly reduced its stock price. The payments platform has immense growth potential but is trading at a cheap valuation of 3.2 times its sales per share. Nuvei has a high revenue growth rate of 39%. Yet it is trading lower than Shopify, which has a 15.6 times price-to-sales ratio, despite a slower revenue growth rate of around 20%.
Nuvei stock is highly volatile and can give you 80-100% capital appreciation in a few months. The last two months of the year are seasonally strong as holiday season sales spike transaction volumes from e-commerce clients. The company benefits from a strong and growing economy as transactions increase.
However, Nuvei plunged into losses in 2023 due to the high financing cost of the Paya acquisition and the delay in securing enterprise clients due to a weak macroeconomic environment. It is signing several enterprise clients as the economy improves, which could boost Nuvei’s transaction volumes and reduce churn rate as big companies are sticky.
Keep an eye on Nuvei’s growth in enterprise transactions and the return to profitability. The stock will keep growing if the business is scaling and losses are narrowing. If any corporate or macro event changes these two growth factors, Nuvei stock’s long-term growth could reverse.
