We recently published a list of 10 Worst Affordable Stocks to Buy Under $10. In this article, we are going to take a look at where Coty Inc. (NYSE:COTY) stands against other worst affordable stocks to buy under $10.
Will There Be a Small Cap Resurgence in 2025?
On February 18, Chris Clark, Chief Executive Officer, Co-Chief Investment Officer, and Francis Gannon Co-Chief Investment Officer, Managing Director at Royce Investment released their research on Small Cap stocks. The report explored the potential resurgence of small-cap stocks, emphasizing their relatively attractive valuations, promising earnings outlook, and the role of heightened market volatility. The experts highlighted that historically, small-cap stocks have outperformed large-cap stocks over the long term but with higher volatility. However, this advantage has eroded recently, with large-cap stocks dominating performance since 2011. Small-cap growth fared better than value during this period, but 2024 marked the eighth consecutive year of underperformance for small-caps relative to large-caps.
Royce Investment remains optimistic about a small-cap resurgence in the current year. They highlighted that one key factor supporting small-cap leadership is valuation. Small-cap stocks are currently trading at their largest discount to large-caps in over 25 years based on metrics such as enterprise value over earnings before interest and taxes. This valuation disparity is across the board including sectors like Information Technology, Industrials, Financials, and Consumer Discretionary. The report noted that while mega-cap companies may be overpriced, numerous bargains exist within the small-cap universe across diverse industries. These attractive valuations provide a compelling case for small-cap stocks to regain market leadership.
Moreover, earnings growth prospects further enhance the case for small caps. Consensus estimates for 2025 project an 89.3% earnings-per-share growth for the Russell 2000 index compared to 30.9% for the Russell 1000 index. The CEO and CIO of Royce Investment highlighted that while this rebound partly reflects recovery from a two-year earnings recession in small-caps, it underscores their potential for significant growth. Investors should focus on an investment approach that focuses on companies with established earnings histories or clear catalysts for future earnings growth.
The report acknowledged that external factors like tariffs and de-globalization trends may create short-term disruptions. However, the fund sees these developments as opportunities for the US-focused small-cap companies to benefit from reshoring and improved supply chain management. The firm welcomes volatility as it often distracts investors from fundamentals, creating opportunities for active managers to identify undervalued companies with strong long-term prospects.
Our Methodology
To compile the list of the 10 worst affordable stocks to buy under $10 we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance. Using the screener we aggregated a list of stocks trading under $10 with a Fwd P/E under 15 and earnings growth expectations this year. Next, we cross-checked the Fwd P/E and earnings growth for each stock from Seeking Alpha and Yahoo Finance. Lastly, we selected the least popular stocks among hedge funds and listed them in descending order of the number of hedge funds that hold stakes in them, as of Q4 2024. Please note that the data was recorded on March 26, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is Coty Inc. (NYSE:COTY) the Worst Affordable Stocks to Buy Under $10?
A close-up of a woman's face wearing a beauty product, highlighting the company's range of luxury items.
Coty Inc. (NYSE:COTY) is a global beauty company specializing in fragrances, color cosmetics, and skin and body care products. It operates through two main segments including Consumer Beauty and Prestige segments.
On February 20, Analyst Susan Anderson from Canaccord Genuity maintained a Buy rating on the stock with a price target of $8. Moreover, Meridian Hedged Equity Fund highlighted Coty Inc.’s (NYSE:COTY) transformation potential in its Q4 2024 investor letter, emphasizing the company’s strategic investments and resilience despite recent challenges. The fund noted that the company is recognized for its efforts in brand development and expansion into high-growth beauty markets, particularly within its prestige and consumer segments. However, the performance was affected by broader retail headwinds, including cautious inventory management by distributors in the US, Australia, and Asia, as well as weak sales in China.
To mitigate these pressures, Coty Inc. (NYSE:COTY) has implemented cost-saving initiatives aimed at protecting profit margins while continuing to invest in strategic growth areas. Meridian Hedged Equity Fund anticipates a reacceleration of sales momentum, driven by holiday season performance and the ongoing expansion of the company’s prestige portfolio. It is one of the worst affordable stocks to buy under $10.
Meridian Hedged Equity Fund stated the following regarding Coty Inc. (NYSE:COTY) in its Q4 2024 investor letter:
“Coty Inc. (NYSE:COTY) is a global beauty company with a growing portfolio of prestige and consumer brands. We hold Coty for its transformation potential through strategic investments in brand development and expansion within high-growth beauty markets. Performance this quarter was impacted by broader retail headwinds, as distributors in the U.S., Australia, and Asian retail channels maintained cautious inventory positions. Weak sales in China further pressured results. Despite these challenges, management implemented cost-saving measures to protect margins while maintaining strategic growth initiatives. We anticipate sales momentum to reaccelerate, supported by holiday season performance and continued expansion of the prestige portfolio.”
Overall, COTY ranks 8th on our list of worst affordable stocks to buy under $10. While we acknowledge the potential of COTY as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COTY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
