Waitr Holdings Inc (WTRH)

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$WTRH !!! = 2 Top Stocks Under $5

Stocks you can buy for $5 or less are often called penny stocks, even though you need a bit more than a few pennies to buy them. While they're not often cheap by traditional valuation metrics, their low share prices make them attractive to many beginning investors. However, for every penny stock that hits, there are dozens of others that don't go anywhere.

While many are start-ups, others are formerly successful companies that have fallen on hard times. Some may bounce back, others won't. But here are a couple of stocks trading under $5 with solid growth prospects.

Waitr Holdings

Waitr Holdings (NASDAQ:WTRH) is a food delivery company whose stock has enjoyed a meteoric rise thanks to the COVID-19 lockdown economy. At the start of this year, it was trading at $0.35 per share, but its share price of $4.61 at Monday's close gives it an increase of just over 1,200% year to date.

The Louisiana-based company allows people to order food from the restaurant of their choice either online or through an app. It serves cities throughout the South, from Texas to Virginia. Waitr has benefited from its focus on small and mid-sized markets, not just serving the big cities that rivals like DoorDash and GrubHub tend to dominate. In these smaller southern markets, Waitr typically is first or second in market share.

But there's reason to believe that Waitr will continue to grow, even as states have reopened and relaxed restrictions on restaurants. Trends indicate a growing demand for delivery services, perhaps accelerated by the pandemic.

The other reason it could be a good investment is that it has turned itself into a good buyout candidate in a consolidating food delivery market. In June, European company Just Eat Takeaway announced plans to buy GrubHub, and Uber Technologies, which owns Uber Eats, made a deal to buy delivery company Postmates in July.

Waitr is an attractive target because it provides direct access to those smaller markets that the big companies don't serve as much. Plus, in addition to its rising stock price, Waitr saw revenue rise in the second quarter from $51.3 million to $60 million year--over-year and for the first time become profitable, with net income of $8 million.

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