3 Stocks Under $10 with Warning Signs

Stocks under $10 pique our interest because they have room to grow (as well as the most affordable option contract premiums). That doesn’t mean they’re bargains though, and we urge investors to be careful as many have risky business models.

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. That said, here are three stocks under $10 to swipe left on and some alternatives you should look into instead.

Domo (DOMO)

Share Price: $4.10

Named for the Japanese word meaning "thank you very much," Domo (NASDAQ:DOMO) provides a cloud-based business intelligence platform that connects people with real-time data and insights across organizations.

Why Should You Dump DOMO?

1. Customers had second thoughts about committing to its platform over the last year as its billings plateaued
2. Estimated sales growth of 1.3% for the next 12 months is soft and implies weaker demand
3. Long payback periods on sales and marketing expenses limit customer growth and signal the company operates in a highly competitive environment

At $4.10 per share, Domo trades at 0.6x forward price-to-sales. Read our free research report to see why you should think twice about including DOMO in your portfolio.

Krispy Kreme (DNUT)

Share Price: $2.97

Famous for its Original Glazed doughnuts and parent company of Insomnia Cookies, Krispy Kreme (NASDAQ:DNUT) is one of the most beloved and well-known fast-food chains in the world.

Why Should You Sell DNUT?

1. Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
2. Cash burn makes us question whether it can achieve sustainable long-term growth
3. Short cash runway increases the probability of a capital raise that dilutes existing shareholders

Krispy Kreme’s stock price of $2.97 implies a valuation ratio of 14.3x forward EV-to-EBITDA. To fully understand why you should be careful with DNUT, check out our full research report (it’s free).

Icahn Enterprises (IEP)

Share Price: $8.13

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Why Does IEP Fall Short?

1. Customers postponed purchases of its products and services this cycle as its revenue declined by 9.6% annually over the last two years
2. Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
3. High net-debt-to-EBITDA ratio of 8× increases the risk of forced asset sales or dilutive financing if operational performance weakens

Icahn Enterprises is trading at $8.13 per share, or 0.5x forward price-to-sales. Check out our free in-depth research report to learn more about why IEP doesn’t pass our bar.

High-Quality Stocks for All Market Conditions

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