The $10-50 price range often includes mid-sized businesses with proven track records and plenty of growth runway ahead. They also usually carry less risk than penny stocks, though they’re not immune to volatility as many lack the scale advantages of their larger peers.
Luckily for you, our mission at StockStory is to help you make money and avoid losses by sorting the winners from the losers. Keeping that in mind, here are three stocks under $50 to avoid and some other investments you should consider instead.
SoundHound AI (SOUN)
Share Price: $11.45
Founded in 2005, SoundHound AI (NASDAQ: SOUN) develops independent voice artificial intelligence solutions that enable businesses across various industries to offer customized conversational experiences to consumers.
Why Does SOUN Give Us Pause?
- Sky-high servicing costs result in an inferior gross margin of 44.1% that must be offset through increased usage
- Operating margin fell by 39 percentage points over the last year as it prioritized growth over profits
- Cash burn makes us question whether it can achieve sustainable long-term growth
SoundHound AI is trading at $11.45 per share, or 28.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than SOUN.
Cognex (CGNX)
Share Price: $34.18
Founded in 1981 when computer vision was in its infancy, Cognex (NASDAQ: CGNX) develops machine vision systems and software that help manufacturers and logistics companies automate quality inspection and tracking of products.
Why Do We Avoid CGNX?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 12.2 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $34.18 per share, Cognex trades at 38x forward P/E. To fully understand why you should be careful with CGNX, check out our full research report (it’s free).
Rocket Companies (RKT)
Share Price: $17.29
Born in Detroit during the 1980s and evolving into a tech-driven financial powerhouse, Rocket Companies (NYSE: RKT) is a fintech company that provides digital mortgage lending, real estate services, and personal finance solutions through its technology platform.
Why Is RKT Not Exciting?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4% annually over the last five years
- Falling earnings per share over the last four years has some investors worried as stock prices ultimately follow EPS over the long term
- 12× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
Rocket Companies’s stock price of $17.29 implies a valuation ratio of 3.5x forward P/B. Check out our free in-depth research report to learn more about why RKT doesn’t pass our bar.
Stocks We Like More
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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