Five Cheap Stocks With Room to Grow - TheStreet

BOSTON (

TheStreet

) -- The stock rally could extend into the first quarter if interest rates remain at record lows. Investors should avoid hot names and look for cheap companies. Here are five to consider.

5. Casey's General Stores

(CASY) - Get Report

operates convenience stores in the Midwest.

The numbers

: Fiscal first-quarter revenue fell 24% to $1.2 billion, but profit grew 54% to $44 million, or 87 cents a share. The company's gross margin rose from 13% to 19%, and its operating margin jumped from 3% to 6%. The company has less-than-ideal liquidity, with a quick ratio of 0.8. But a debt-to-equity ratio of 0.2 indicates modest leverage. The company reports fiscal second-quarter results this morning.

The stock

: Casey's has rallied 37% this year, more than the

Dow Jones Industrial Average

and

S&P 500 Index

. The stock trades at a price-to-earnings ratio of 16, a discount to the market and food retailers. The shares yield 1.1% in dividends.

Next Opportunity:

Grainger.

4. W.W. Grainger

(GWW) - Get Report

distributes facility maintenance products.

The numbers

: Third-quarter net income increased 3% to $145 million, or $1.88 a share. Revenue fell 14% to $1.6 billion. Grainger's gross margin was unchanged at 42%, but its operating margin declined from 13% to 12%. The company has a strong financial position, with $672 million of cash, compared to $535 million of debt.

The stock

: Grainger has risen 25% this year, beating the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 17, a discount to the market and distributor peers. The shares yield 1.9% in dividends.

Next Opportunity:

Smucker.

3. J.M. Smucker

(SJM) - Get Report

sells jams and jellies.

The numbers

: Fiscal second-quarter net income almost tripled to $140 million as earnings per share climbed 26% to $1.18, hurt by a higher share count. Revenue grew 52% to $1.3 billion. J.M. Smucker's gross margin rose from 31% to 39%, and its operating margin jumped from 11% to 18%. Its balance sheet is liquid, with $410 million of cash. A debt-to-equity ratio of 0.3 indicates modest leverage.

The stock

: J.M. Smucker has risen 37% this year, outperforming the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 17, a discount to the market and packaged food makers. The shares yield 2.4% in dividends.

Next Opportunity:

Lincoln Educational Services.

2. Lincoln Educational Services

(LINC) - Get Report

provides career education.

The numbers

: Third-quarter profit more than doubled to $14 million, or 50 cents a share, as revenue grew 48% to $148 million. Lincoln's gross margin rose from 63% to 65%, and its operating margin increased from 10% to 16%. The company has a strong financial position, with $38 million of cash and $37 million of debt.

The stock

: Lincoln has advanced 57% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 14, a discount to the market and education peers. Lincoln doesn't pay dividends. Next Opportunity:

Church & Dwight.

1. Church & Dwight

(CHD) - Get Report

sells household products.

The numbers

: Third-quarter net income soared 43% to $70 million and earnings per share climbed 42% to 98 cents. Revenue inched up 2% to $646 million. Church & Dwight's gross margin rose from 43% to 49%, and its operating margin ascended from 15% to 18%. A quick ratio of 1.1 indicates adequate liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.

The stock

: Church & Dwight has risen 7% this year, underperforming major U.S. indices. The stock trades at a price-to-earnings ratio of 18, which is a discount to the market, but on par with household product makers. The shares yield 0.9% in dividends.

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