When the ASX has a number of stocks already trading at above $100 a share, some investors might be considering cashing in their gains and investing in some companies with 'cheaper' share prices.
And by that I mean shares trading for under $5, although they may not necessarily be cheap.
Let me explain.
Much depends on a company's earnings. A company can have a share price of above $100, but generate earnings of more than $5 per share. That would place the company on a P/E ratio of 20x. But a company with a share price of $5 generating just 50 cents of earnings is cheaper, because it is trading on a P/E ratio of 10x. If the company was generating just 10 cents of earnings, then it would be on a P/E ratio of 50x –actually more expensive on a P/E basis.
These five companies' shares all trade under $5.00, but they are generating strong revenue growth (at their most recently announced financial results) as the table below shows…
| Company | Share Price | Market Cap ($m) | Revenue growth |
| Nearmap Ltd (ASX: NEA) | $0.58 | $208.6 | 20% |
| Speedcast International Ltd (ASX: SDA) | $3.95 | $560.7 | 41% |
| PWR Holdings Ltd (ASX: PWH) | $3.21 | $321.0 | 46% |
| Reliance Worldwide Corporation Aus P Ltd (ASX: RWC) | $3.21 | $1,685.3 | 18% |
| Appen Ltd (ASX: APX) | $3.24 | $314.6 | 49% |
Source: Company reports
When the top 20 ASX stocks are struggling to even generate growth, it might be time for investors to take a look at the smaller end of the market.
