10 Best Undervalued Stocks to Buy Under $5

​8. Prospect Capital Corporation (NASDAQ:PSEC)

Forward P/E Ratio: 4.8

Number of Hedge Fund Holders: 14

Prospect Capital Corporation (NASDAQ:PSEC) is one of the Best Undervalued Stocks to Buy Under $5. The stock trades around a forward price to earnings ratio of 4.8, which is well below the S&P’s average and also below the sector median of 10.98.

​Recently, on May 27, Prospect Capital Corporation (NASDAQ:PSEC) announced that it has agreed to sell Valley Electric Company, which is a firm in its investment portfolio. The sale will be made to specialty contractor MYR Group for approximately $328 million and is expected to close around July 1, 2026.

Management noted that after accounting for adjustments and earn-out payments, the company is expected to receive net exit proceeds of around $280 million. Moreover, when combined with prior returns from interest, dividends, and other cash flows since the original 2012 investment, the total outcome represents a 20.4% annualized return and nearly 5 times the original capital invested.

​Valley Electric was founded in 1982 and provides electrical contracting services for critical infrastructure. Prospect has owned the company for 14-years during which the company grew substantially, with revenues expanding by 289% and its geographic footprint widening considerably. Prospect framed the exit as a demonstration of its long-term investment approach.

​Prospect Capital Corporation (NASDAQ:PSEC) is a business development company that focuses on lending to and investing in private businesses. The company’s debt and equity investments allow it to generate current income and achieve long-term capital appreciation.