The stock market hits new highs almost every week. Tech stocks are leading the way, with valuation multiples going to ever-higher levels.
This week, we got news that inflation continues to moderate, which paves the way for potential Federal Reserve interest rate cuts in the near future. Not surprisingly, momentum traders bid up growth stocks to even higher prices on this development.
As it turns out, however, the real winner may be elsewhere. These three off the radar stocks trading under $15 have seen their share prices tumble over the past year. They could all be set for a major comeback — even tripling by 2026 if things go well — as more conducive macroeconomic policy takes hold.
GrafTech (EAF)
GrafTech (NYSE:EAF) develops, manufactures, and sells graphite and carbon-based solutions worldwide.
More specifically, it manufactures graphite electrodes that are used in electric arc furnace steel. While this may seem like a niche business, surprisingly enough, this Ohio-based firm has been in business since 1886.
As the steel market is heavily cyclical, GrafTech has seen its fortunes fade over the past year. A weakening auto market — plagued by higher interest rates — reduced demand for steel and related inputs such as GrafTech’s graphite solutions.
GrafTech’s revenues are projected to fall another 15% this year on top of last year’s large decline. The company is also significantly unprofitable at the moment.
But EAF stock more than reflects these concerns, with shares off 75% over the past year. Insiders seem to agree, with a major holder buying stock aggressively in recent months.
Denny’s (DENN)
Denny’s (NASDAQ:DENN) is a classic American dining chain with more than 1,700 locations.
Like many restaurant stocks, it has had a rough go of it since the pandemic. DENN stock was trading around $20 prior to the pandemic and shares go for less than $7 now. It did bounce back to $20 in 2021 amid optimism that restaurants would quickly recover to 2019 levels of business. But those gains have long since disappeared.
That comes as more traditional restaurant chains like Denny’s haven’t captured the same energy as newer entrants like Cava (NYSE:CAVA) or Sweetgreen (NYSE:SG).
That said, a change in economic conditions could give Denny’s a boost. Restaurants like Cava have fared well during a period of carefree consumer spending. But $17 salads may give way to more hearty and cheaper fare such as what Denny’s offers when economic conditions worsen.
DENN stock has fallen 45% over the past year. This has pushed the stock down to less than 11 times forward earnings. With the company posting positive top- and bottom-line growth, this sets Denny’s up for a major turnaround on any improvement in sentiment.
Perion Networks (PERI)
Perion Networks (NASDAQ:PERI) is the quintessential example of a company that flew slightly too close to the sun. Shares jumped from $3 in 2019 to a peak of more than $40 per share last year. Since then, PERI stock has plunged 75% amid a slowdown in revenues and multiple weak earnings reports.
The company’s digital advertising platform enjoyed explosive growth during the early days of the pandemic, growing revenues from $261 million in 2019 to $743 million in 2023. However, revenues are projected to slide to just $500 million this year, largely driven by changes with a key customer, Microsoft (NASDAQ:MSFT). Specifically, Microsoft’s Bing search engine removed several advertising providers, including Perion, from its platform.
This represents a major intermediate-term hit to Perion’s outlook. However, the company remains significantly profitable on an EBITDA-adjusted basis. Perion has already proven that its advertising technology can deliver rapid growth with the right partners. And its AI-driven ad solutions business could spark both customer and investor interest.
The Microsoft strategic changes certainly have hit Perion hard. But with the stock down from $40 to $8, it’s not hard to imagine sentiment swinging back in the upward direction and shares tripling back to $25 or so once top- and bottom-line growth return.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.