Stocks trading in the $1-10 range are generally smaller players with less risk than their penny stock counterparts. But that doesn’t mean the underlying businesses are cheap, and we advise caution as many have questionable fundamentals.
The bad behavior exhibited by lower-quality companies in this space can spook even the most seasoned professionals, which is why we started StockStory - to separate the good from the bad. Keeping that in mind, here are three stocks under $10 to avoid and some other investments you should consider instead.
El Pollo Loco (LOCO)
Share Price: $8.89
With a name that translates into ‘The Crazy Chicken’, El Pollo Loco (NASDAQ:LOCO) is a fast food chain known for its citrus-marinated, fire-grilled chicken recipe that hails from the coastal town of Sinaloa, Mexico.
Why Should You Dump LOCO?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Modest revenue base of $476 million gives it less fixed cost leverage and fewer distribution channels than larger companies
- Estimated sales growth of 3.5% for the next 12 months is soft and implies weaker demand
El Pollo Loco is trading at $8.89 per share, or 4.1x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including LOCO in your portfolio.
Red Robin (RRGB)
Share Price: $2.77
Known for its bottomless steak fries, Red Robin (NASDAQ:RRGB) is a chain of casual restaurants specializing in burgers and general American fare.
Why Do We Avoid RRGB?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its menu offerings and dining experience
- Earnings per share decreased by more than its revenue over the last five years, showing each sale was less profitable
- High net-debt-to-EBITDA ratio of 14× increases the risk of forced asset sales or dilutive financing if operational performance weakens
Red Robin’s stock price of $2.77 implies a valuation ratio of 0.9x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why RRGB doesn’t pass our bar.
Custom Truck One Source (CTOS)
Share Price: $4.20
Inspired by a family gas station, Custom Truck One Source (NYSE:CTOS) is a distributor of trucks and heavy equipment.
Why Is CTOS Risky?
- Muted 4.6% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 29.2 percentage points
- Short cash runway increases the probability of a capital raise that dilutes existing shareholders
At $4.20 per share, Custom Truck One Source trades at 57.3x forward P/E. If you’re considering CTOS for your portfolio, see our FREE research report to learn more.
Stocks That Overcame Trump’s 2018 Tariffs
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Axon (+711% five-year return). Find your next big winner with StockStory today for free.