Top stocks for under $5

On its own the price of a share tells you very little. Just as one apple is still only one apple whether it is chopped in halves, quarters, or eighths, the same goes for a company. A company can be divided by 10 shares or 10 million shares – it will affect the price per share but not the total price for the company.

While in theory the price of a share tells us little, in practice often large companies have high share prices. In part this is often because a company has started small and grown large. There are of course exceptions such as AMP Limited (ASX: AMP) and Telstra Corporation Ltd (ASX: TLS) which both currently trade at just over $5 per share.

In general however, many ‘mid-cap’ stocks – the stocks which are today’s growth stories and which could in the future to be the ASX’s biggest companies – trade for less than $5 per share. Recent examples of companies which have made this leap include SEEK Limited (ASX: SEK) and Carsales.Com Limited (ASX: CRZ) which now have market capitalisations in the billions. As recently as 2011 and 2012 respectively however they both used to trade for under $5 per share!

Newly listed early child care service provider Affinity Education Group Ltd (ASX: AFJ) trades at $1.26. Like its peer G8 Education Ltd (ASX: GEM) the fragmented industry is ripe for consolidation providing Affinity with an expansive opportunity to grow as it implements its roll-up strategy.

Freelancer Ltd (ASX: FLN) is also recently listed and currently trades at $1.27. With a focus on recruitment and matching jobs with jobseekers, Freelancer claims to be the world’s largest outsourcing marketplace. With the Freelancer model already operating globally in over 247 countries the potential leverage in Freelancer is enormous.

Vocation Ltd (ASX: VET) is trading at $2.47. Like peer Navitas Limited (ASX: NVT), Vocation operates in the education and training sector. It’s an appealing sector for investors to gain exposure to as the margins and growth prospects are often superior to other industries.

Foolish takeaway

These stocks are all growing strongly and positioning themselves as leaders in their respective industries. They might trade at under $5 today, but their share prices could be a lot higher in the future.

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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.

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