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Top 10 Buy-Rated Stocks Under $5

BOSTON ( TheStreet) --Stocks trading under $5 typically have no analyst coverage, never mind a buy rating, leaving investors to do the homework for themselves. However, a select few under-$5 stocks have very favorable coverage from analysts, which can heavily influence share price movements. The following 10 U.S. stocks trade below $5 and have garnered the most buy ratings from analysts.

10. Paetec Holding (PAET) offers voice and data services to large- and small-sized business customers in metropolitan areas. Shares have fallen 18% in the last month but have climbed 22% over the last year.

Consensus: Of the analysts covering Paetec, seven, or 53.9%, argue that the stock will outperform, while six analysts recommend holding shares.

Closing Price: $4.02 (June 2)

Bullish Case: Collins Stewart, which has a buy rating and $6 price target on Paetec, argues that as the decline in the company's wireline business "becomes less of a drag upon results and as it crosses back over to positive revenue growth, starting this quarter, investors will accord a higher multiple to its valuation."

Bearish Scenario: Deutsche Bank, which has a hold rating and $4.20 price target on Paetec shares, says that "while positive on the company's ability to rebound from economic pressures and leverage its recent acquisitions, we have yet to gain visibility into sustained improvement to macro-employment levels, which tend to lead enterprise revenue trends by three to four quarters."
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