As I was preparing to write about cheap stocks to buy that could increase by ten times over the next few years, I wondered what measuring stick I should use to appropriately identify names that were down but definitely not out. 

I looked online for a few ideas. 

For example, NerdWallet recently defined cheap stocks as S&P 500 companies whose share price traded between $5 and $20, but had risen so far this year. 

InvestorPlace contributor Brian Paradza focused on the PEG ratio — defined as the price–earnings ratio divided by firms’ earnings per share growth — to find some stocks to buy and hold for the long haul.      

Lastly, Barron’s used the enterprise value-sales ratio to find cheap tech stocks. The publication noted that the ratio factors in cash and debt, instead of just market capitalization, making it a more compelling metric than price-sales. 

So, based very loosely on these three metrics, I’m going to select seven stocks from the S&P 1500 from seven different sectors. I believe that all of these names have a shot at appreciating ten times by 2027.

News Corporation (NWSA)

Ever since News Corp’s (NASDAQ:NWSA) sister company, 21st Century Fox, was acquired by Disney (NYSE:DIS) in March 2019, I completely forgot about the owner of media brands such as The Wall Street Journal, Barron’s, and HarperCollins Publishers. 

However, NWSA remains a decent-sized business with a current market cap of a little over $10 billion.  

HarperCollins CEO Brian Murray recently said that if regulators don’t allow Penguin Random House’s bid to buy Simon & Schuster to go through, his publishing house would like to purchase Simon & Schuster from Paramount Global (NASDAQ:PARA). 

Regulators are concerned that, regardless of who buys Simon & Schuster, the move would reduce the number of major publishers from five to four, lowering the advances that authors receive and reducing consumers’ choices. The tie-up between Penguin Random House and Simon & Schuster would bring together the largest and fourth-largest publishers in the U.S.

News Corp reported its full-year results on Aug. 8. Its revenue and net income both set records in fiscal 2022, as its sales grew 11% to $10.39 billion, while its net income soared 95% to $760 million.

In 2022, all five of News Corp’s operating segments generated earnings before interest, taxes, depreciation, and amortization (EBITDA) of at least $200 million, with Realtor.com leading the way with $574 million. 

The company’s other businesses could surprise investors over the next few years.  

Ford (F)

The analysts have mixed views on Ford (NYSE:F) stock. Of the 22 analysts who cover Ford, only eight rate it a “buy” or an “overweight,” with most sitting on the fence. Further, their average target price is just $16.43, only $1.07 above where it’s currently trading.

I remember when people, myself included, thought Ford was ready for the scrap heap in 2020 because it was losing billions of dollars per quarter. But in the first half of 2022, the company’s free cash flow, excluding certain items, was $3.0 billion,  versus -$5.5 billion during the same period a year earlier.    

In the second quarter, Ford’s share of the U.S. EV market hit a record 10.9%. In the first seven months of 2022, Ford sold 30,468 EVs in the U.S. in 2022, including 7,700 in July. 

All this good news comes at a cost.  The company announced on Aug. 22 that it would lay off 2,000 salaried workers and another 1,000 contract employees. That’s about 6% of its full-time salaried work force in the U.S. and Canada.  

As part of its  cost-cutting initiative, Ford plans to trim $3 billion annually from its gasoline-vehicle business by 2026. 

DiamondRock Hospitality (DRH)

DiamondRock Hospitality (NYSE:DRH) is a real estate investment trust (REIT) that owns 34 premium resorts in the U.S. with more than 9,500 rooms. Over 60% of the company’s properties are leisure-focused hotels in places such as Key West, Charleston, and Sonoma. 

The REIT’s monthly operating results continue to strengthen. In January, its occupancy rate was 41.3% while its RevPAR (revenue per available room) came in at $101.19. By June, these figures had risen to 79.4% and $240.37 respectively. 

How strong have DiamondRock’s operations gotten?

In Q2 , its revenue was $281.4 million, 9.1% higher than in Q2 of 2019. On the bottom line, it reported adjusted funds from operations (AFFO) of $76.5 million, 17.5% higher than in Q2 of 2019. Its RevPAR in Q2 was 2.4% higher than in Q2 of 2019, coming in at $189.43.

“We are pleased to report that DiamondRock set new records for RevPAR, total revenues, and hotel profit margins in the second quarter on robust travel demand,” said Mark W. Brugger, President and Chief Executive Officer of DiamondRock Hospitality Company. 

DRH currently trades at 2.24 times its  sales, its lowest price–sales ratio since 2018. DRH traded near $22 in July 2o07. I could see it regaining that level within 24-36 months. DRH might not increase tenfold, but investors ought to make money on it.

CNX Resources (CNX)

CNX Resources (NYSE:CNX) is a Pittsburgh-based independent producer of natural gas. Most of its gas fields are in the Appalachian Basin in Pennsylvania and West Virginia. The company has 4,400 producing gas wells. In 2021, these wells produced 590 billion cubic feet equivalent of gas. It has 9.63 trillion cubic feet equivalent of proved gas reserves. 

One of my favorite metrics is free cash flow (FCF). In Q2, CNX generated $62 million of FCF. It was the company’s tenth consecutive quarter of positive FCF. In 2022, it expects to have $700 million of  FCF, equating to  a 21% FCF yield. I consider the valuation of stocks with FCF yields above 8% to be attractive. 

Over the next four years, CNX estimates that  its FCF per share will increase at a compound annual growth rate of 31%. 

CNX has repurchased 16% of its outstanding shares over the past seven quarters. It also repaid a significant amount of its debt. Since Q3, it has reduced its adjusted net debt by $315 million to $2.23 billion. 

While analysts have mixed views on CNX stock, their average price target on the name is $25.40, 49% above its current level.

KeyCorp (KEY)

In 2022, KeyCorp’s (NYSE:KEY) total return is -20.2%, 3.64 percentage points worse than the entire U.S. stock market, and 12 percentage points below the average return of all regional banks.

However, despite its return trailing that of the market and its peers, the Cleveland-based bank is doing reasonably well from an operational standpoint.

The bank reported its Q2 results in late July. Its net income climbed 20% versus Q1 to $504 million, KeyCorp’s return on average tangible common equity from continuing operations rose 6.78 percentage points quarter-over-quarter to  20.90%. 

CEO Chris Gorman highlighted the bank’s loan growth during the quarter. The company’s loan portfolio grew 5.2% versus Q1 to $109.1 billion. Its loans to both commercial and consumers climbed in Q2. The value of its non-performing loans at the end of Q2 was $429 million or 0.38% of its total loan portfolio. That percentage was down 0.63% versus the same period a year earlier.  

KeyCorp managed to grow its non-interest income by 2.3% YOY to $404 million while its net interest income rose 6.0% YOY to $440 million.  

One area of strength at the bank is its Laurel Road digital banking platform, which caters to healthcare and business professionals. 

Pediatrix Medical Group (MD)

Pediatrix Medical Group (NYSE:MD) provides prenatal, neonatal and pediatric services to hospitals and intensive care units across America. In September 2015, the company’s stock traded above $85, versus its current price of $17.8. MD has a shot to get back to $85 by 2027, but to do so,  the firm will have to perform at an exceptionally high level. 

For most of its history, the company was known as Mednax, which was founded in 1979 with one neonatal practice. But on July 1, it changed its name to Pediatrix, while retaining its appropriate “MD” stock symbol. Today it has more than 4,700 affiliated physicians providing care in 38 states and Puerto Rico. 

In Q2, Pediatrix ‘s net revenue climbed 2.7% YOY  of $486 million (2.7% YOY growth) as its operating income was basically flat versus the same period a year earlier, coming in at $50.2 million,.  More importantly, it finished Q2 with $808 million of total debt, down considerably from $1.0 billion at the same point a year earlier. 

Of the seven names on my list, MD is definitely the underdog of the group, but I wanted to include a healthcare stock. 

Xperi Holding (XPER)

On four occasions in Xperi Holding’s (NASDAQ:XPER) 19-year history as a public company, its share price has traded over $40. A fifth time could be in the cards in 2023. 

In June, I selected XPER stock as one of two names  trading around the same price as Lyft (NASDAQ:LYFT) at $15, which I thought were better buys than Lyft. The other stock  was Xenia Hotels & Resorts (NYSE:XHR). Since that column was published, XPER is up 10.5%, XHR is up 8.7%, and Lyft is down 9.9%. 

I chose Xperi at the time because it traded at 1.62 times its sales and was planning to spin off its intellectual property (IP) business this fall to focus on its product businesses. including TiVo, the streaming and live TV app. 

On Aug. 29, Xperi’s board approved the separation of its product business from its IP business. Shareholders will receive a pro rata distribution of Xperi Inc. shares trading under the symbol XPER on the NYSE while the IP business will be called Adeia Inc., have the symbol ADEA, and trade on Nasdaq.     

The separation will allow investors to evaluate both businesses more easily while enabling each business to allocate capital as deemed appropriate by its  management and board. 

This could be a case where two is better than one.

On the date of publication, Will Ashworth 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.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.