The POWR Rankings points the way once more to a stellar opportunity for a stock under $10 with tremendous upside potential. This time around its with Heritage Global (HGBL). Read on below for the full story.
If one stock under $10 most epitomizes the Wall Street axiom, “Bad news is sweet news”, it will be hard to argue that Heritage Global (HGBL) shouldn’t be that stock.
Heritage Global is in the business of creating wealth when things are usually not going well for industrial businesses, or financial assets. When you’ve been reading about the coming industrial real estate bust, which you’ve got needed to since it’s always in the news, then you definitely’ve identified an area where Heritage Global can be a winner.
HGBL auctions off the assets from industrial businesses when the factory doors shut (including whole factories), sells the furniture and fixtures when a industrial business downsizes, goes under, or simply rebrands (yes, they really sold the neon blue bird signs when Twitter became X), and so they find buyers for financial assets (rising mortgage rates causing debt defaults, that is their bag as well).
While the current POWR Rankings put the overall rating for Heritage Global at a C, some of the metrics which turn first, Sentiment and Momentum, are trending higher and currently stand at B’s in each categories. Sentiment is definitely HGBL’s strongest attribute immediately, because it ranks above 98% of all U.S. stocks.
Turning to the numbers, HGBL has a PE of only 6.9x and trades at a really acceptable 10.3x projected earnings. The corporate has gross margins of 54.29%, and operating margins run at 8.83%. Sales grew 82% on an annual basis in 2022.
Of their 2Q earnings release in early August, HGBL CEO Ross Dove clearly stated how he sees the current economic environment. “Each of our operating divisions are seeing tremendous opportunities in the marketplace, as the difficult economy is creating heightened volume in the financial and industrial assets coming to market.” If the U.S. consumer becomes tapped out, a notion that’s seemingly growing by the day, the “bad news” will give an additional boost to HGBL.
The stock has run from just over $1 in the middle of 2022, to simply over $4 in July of this yr, and has recently pulled back to simply over $3. And if rising rates proceed to pressure businesses and the consumer, this may very well be an opportune pull back in HGBL shares.
I believe this stock shouldn’t be only under $10, but under the radar for so much of investors. It makes an incredible offset to what’s a difficult rising rate environment for a lot of businesses.
What To Do Next?
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HGBL shares were unchanged in after-hours trading Monday. 12 months-to-date, HGBL has gained 31.91%, versus a 18.15% rise in the benchmark S&P 500 index during the same period.
About the Writer: Jay Soloff
Jay is the lead Options Portfolio Manager at Investors Alley. He’s the editor of Options Floor Trader PRO, an investment advisory bringing you skilled options trading strategies. Jay was formerly an expert options market maker on the floor of the CBOE and has been trading options for over 20 years.
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