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Overview

Last week, I wrote Round 1 of this article in which I listed and reviewed three low priced stocks that I believed worth buying. The stocks I reviewed in Round 1 were LSI Corporation (NASDAQ:LSI), CryoLife, Inc. (NYSE:CRY), and Xerox Corporation (NYSE:XRX). For Round 2, I will once again focus on stocks that are currently priced at under $10.

In determining why I find these stocks attractive, I will be looking at each company's financial performance, current valuation, recent trading activity, earnings and future outlook.

Also, for this round two of the three stocks I will be reviewing are international stocks. One of them has company headquarters in Canada and the other company is headquartered in Spain. Because of this, these stocks carry additional risks that are associated with investing internationally such as currency exchange rate risk, political and economic risk, etc.

Stock No. 1

Alcoa, Inc. (NYSE:AA) produces and manages primary aluminum, fabricated aluminum, and alumina throughout the world. It operates in four divisions that include: Alumina, Primary Metals, Global Rolled Products, and Engineered Products and Solutions. The company was founded in 1888 and is headquartered in New York.

Financial Performance

Profit Margin (Trailing Twelve Months)0.55%
Return on Assets (Trailing Twelve Months)1.24%
Return on Equity (Trailing Twelve Months)0.64%
Revenue (Trailing Twelve Months)23.41B
Revenue per share (Trailing Twelve Months)21.91
Quarterly Revenue Growth (Year Over Year)-1.90%

In the company's latest quarterly report, AA reported revenue of $5.8 billion, positive free cash flow of $228 million, cash on hand of $1.2 billion, and $539 million in productivity gains across all segments.

Current Valuation and Recent Trading Activity

AA has a current price-to-earnings value of 29.5X and a price-to-book value of 0.5X with earnings per share of $0.27.

AA closed Friday at $7.97, $1.96 shy of its 52-week high and $0.34 higher than its 52-week low. It is trading above both its 200-day moving average of $8.43 and its 50-day moving average of $8.00.

Earnings

Alcoa reported earnings per share of $0.07 in its last quarterly report, an increase from the same period last year in which earnings per share were $0.06 per share. AA has a one year earnings growth rate of 105.56%, which is significantly higher than the one year growth rate of 83.38% within the basic materials sector.

Company Outlook

Alcoa has paid a consistent quarterly dividend of $0.03 per share since 2009 and doesn't appear to be in jeopardy. S&P recently increased their EPS estimate for AA by $0.13 per share for 2013 and by $0.10 per share for 2014. AA's stock price has declined significantly from its $9.32 price in February, and at its current price I feel it is undervalued. As the recovery for the U.S. economy continues, I believe that Alcoa will see increased revenues and earnings in the future, making it a solid buy.

Stock No. 2

Pengrowth Energy Corporation (NYSE:PGH) explores, develops, and produces oil and natural gas through its reserves in Canada. The company was founded in 1988 and is headquartered in Calgary, Canada.

Of the three companies I'm reviewing in this article, PGH is the only company that I currently own stock in.

Financial Performance

Profit Margin (Trailing Twelve Months)-4.16%
Return on Assets (Trailing Twelve Months)-0.40%
Return on Equity (Trailing Twelve Months)-1.44%
Revenue (Trailing Twelve Months)1.30B
Revenue Per Share (Trailing Twelve Months)2.68
Quarterly Revenue Growth (Year Over Year)29.30%

In Q2 of this year, PGH reported oil and gas sales of $405 million, a 4% increase from Q1 and a 23% increase from the same period last year.

Current Valuation and Recent Trading Activity

Pengrowth Energy has a current price-to-sales value of 2.31X and a price-to-book value of 0.72X with earning per share of $-0.08.

PGH is currently trading at $5.71, $1.78 shy if its 52-week high and $1.89 higher than its 52-week low. It is trading above both its 200-day moving average of $4.99 and its 50-day moving average of $5.24.

Earnings

PGH reported earnings of -$0.08 per share in Q2 of this year. This was PGH's first earnings miss in its last four quarterly reports.

Company Outlook

PGH has struggled recently in maintaining positive earnings, but I think they are on the verge of a significant turnaround. One of the biggest reasons I believe this is the progress made towards the Lindbergh project. This year, PGH has received EPEA approval for the first phase of this project. PGH also announced last month a 51% increase in proven reserves in Lindbergh. The biggest news related to this project was when PGH announced that it was 100% funded through the recent sales of non-core assets.

PGH pays a $0.04 monthly dividend and has expressed a strong commitment to maintaining this dividend. I believe that Lindbergh will be a strong catalyst for future growth at PGH and will allow the company to easily maintain if not increase its monthly dividend. At its current price, I consider PGH a buy.

STOCK No. 3

Banco Santander SA (NYSE:SAN) is the largest bank in Spain as well as the largest international bank in Latin America. They provide banking services for individuals and companies through their three divisions: 1) Retail Banking, 2) Global Wholesale Banking, and 3) Asset Management and Insurance. It was founded in 1857 and is headquartered in Madrid, Spain.

Financial Performance

Profit Margin (Trailing Twelve Months)6.83%
Return on Assets (Trailing Twelve Months)0.21%
Return on Equity (Trailing Twelve Months)3.14%

Revenue (Trailing Twelve Months)

33.81B
Revenue Per Share (Trailing Twelve Months)3.42
Quarterly Revenue Growth (Year Over Year)-9.70%

In Q2, SAN reported a 29% increase in profit over the same period last year.

Current Valuation and Recent Trading Activity

Banco Santander has a current price-to-earnings value of 13.7X and a price-to-book value of .70X with earning per share of $0.54.

SAN is currently trading at $7.37, $1.49 shy if its 52-week high and $1.41 higher than its 52-week low. It is trading above both its 200-day moving average of $7.30 and its 50-day moving average of $6.78.

Earnings

SAN reported a 29% rise in first half earnings this year. Bad loan percentage did increase as well, but a rise in additional deposits help to offset the associated risk of those.

Company Outlook

Banco Santander pays a quarterly dividend with an annual yield of 8.40%. The company stated in its latest earnings report that it will maintain its current dividend.

This bank has done a great job of expanding so that they don't solely rely on Spain and European countries. A sizeable percentage of SAN's profits come from Latin America and the United States. With nearly 75% of SAN's operations related to retail banking, Banco Santander is primed and ready for a European recovery. With a price currently under book, I think SAN is definitely a buy.

Conclusion

With solid financials, strong management, and a commitment to shareholders, I feel that the three companies reviewed above (AA, PGH, and SAN) are all solid buys at the moment. Each company provides dividends that they appear committed to and in my opinion all three have currently undervalued stocks.

I feel that each company has great opportunities for large growth in the next several years. As US and European economies continue their recovery, Alcoa is poised to see increased revenues and earnings in the coming years. With the Lindbergh project underway for Pengrowth Energy, I see sizable hikes in PGH's revenue and cash flow in the coming years. As PMI and GDP indicates that Europe may finally be coming into a sustainable economic turnaround, Banco Santander stands ready to take advantage.

I will follow up this article with round 2 of my "low priced stocks to avoid" article. I hope to continue submitting "rounds" for both "buy" and "avoid" low priced stocks on a weekly to semi-weekly basis.

Source: Low-Priced Stocks Worth Buying Now: Round 2