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Last week, I wrote Round 2 of this article in which I listed and reviewed three low-priced stocks that I believed worth buying. The stocks I reviewed in Round 2 were Alcoa (AA), Pengrowth Energy (PGH), and Banco Santander SA (SAN). Round 1 stock selections and reviews can be found here.

For Round 3, 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.

Stock No. 1

8X8, Inc. (EGHT) provides telecommunication services and equipment for internet, telephone and video applications. Through web-based conferencing, cloud-based computing services, three-way calling, caller ID blocking services, and more, EGHT has become a legitimate carrier for small and mid-sized businesses.

Financial Performance

Profit Margin (Trailing Twelve Months)6.64%
Return on Assets (Trailing Twelve Months)4.77%
Return on Equity (Trailing Twelve Months)5.55%
Revenue (Trailing Twelve Months)112.37M
Revenue per share (Trailing Twelve Months)1.56
Quarterly Revenue Growth (Year Over Year)18.80%

EGHT has seen consistent growth in revenue and profit the past several years. The company has also seen increases in assets and cash flow over the same time period (2010 through 2013).

Current Valuation and Recent Trading Activity

EGHT has a current price-to-earnings value of 54.6x and a price-to-book value of 4.7x with earnings per share of $0.17.

EGHT closed Friday at $9.32, $0.16 shy of its 52-week high and $3.70 higher than its 52-week low. It is trading above both its 200-day moving average of $7.56 and its 50-day moving average of $8.74.

Earnings

EGHT reported earnings per share of $0.05 in its last quarterly report, an increase from the same period last year in which earnings per share were $0.04 per share. EGHT has a one-year earnings growth rate of 50%, which is higher than the one-year growth rate of 30.69% within the computer and technology sector.

Company Outlook

EGHT doesn't provide a dividend, but what the company does offer is a strong possibility of growth. Double-digit growth is expected from the company for the next five years. Of the analysts I have seen covering this stock, four have it rated as a strong buy, one as a buy, and two as a hold. EGHT has done a good job at finding new customers and keeping existing ones. If this trend persists, there should be no reason that this stock does anything but continue moving up.

Stock No. 2

Farmers National Banc Corp. (FMNB) operates in the domestic banking industry as a full service national bank engaged in commercial and retail banking.

Financial Performance

Profit Margin (Trailing Twelve Months)18.46%
Return on Assets (Trailing Twelve Months)$0.80
Return on Equity (Trailing Twelve Months)$7.72
Revenue (Trailing Twelve Months)$48.75M
Revenue per share (Trailing Twelve Months)$2.60
Quarterly Revenue Growth (Year Over Year)2.10%

For Q2 of this year, FMNB saw a rise of 14.3% in non-interest income from the same period last year. FMNB also saw non-performing loans decrease from $9.9 million to $8.1 million.

Current Valuation and Recent Trading Activity

FMNB has a current price-to-earnings value of 12.9x and a price-to-book value of 1.0x with earnings per share of $0.48.

FMNB closed Friday at $6.31, $0.59 shy of its 52-week high and $1.00 higher than its 52-week low. It is trading below its 200-day moving average of $6.39 and just above its 50-day moving average of $6.30.

Earnings

Last quarter, FMNB reported earnings of $0.10 per share. It was the bank's 122nd consecutive quarter of positive earnings. While earnings have been positive, they haven't been increasing. The acquisition of National Associates, Inc. earlier this year is one of the changes that should help growth of earnings in the future.

Company Outlook

FMNB pays a dividend just over 2% and with a payout ratio of 31% the dividend should be safe with the possibility to grow as earnings grow. FMNB's strategy to diversify revenue streams and increase revenues through fees is the right direction for the company to take. Non-interest income has been increasing while non performing assets have been decreasing. In my opinion, FMNB should flourish in the years to come.

Stock No. 3

Magic Software Enterprises Ltd. (MGIC) develops, markets, and supports application platforms for software development and deployment, allowing rapid customization and integration with existing systems.

Financial Performance

Profit Margin (Trailing Twelve Months)11.26%
Return on Assets (Trailing Twelve Months)6.99%
Return on Equity (Trailing Twelve Months)13.59%
Revenue (Trailing Twelve Months)$136.48M
Revenue per share (Trailing Twelve Months)$3.73
Quarterly Revenue Growth (Year Over Year)24.00%

Revenues for the first half of 2013 increased 17% over the same period last year. Operating cash flow for the first six months of the year totaled approximately $11 million.

Current Valuation and Recent Trading Activity

MGIC has a current price-to-earnings value of 12.8x and a price-to-book value of 1.8x with earnings per share of $0.47.

MGIC closed Friday at $5.96, $0.64 shy of its 52-week high and $2.20 higher than its 52-week low. It is trading above both its 200-day moving average of $5.32 and its 50-day moving average of $5.88.

Earnings

MGIC reported earnings per share of $0.10 for Q2. The company has reported positive earnings each quarter since 2007. MGIC has a 5-year growth rate of over 30%.

Company Outlook

Magic Software Enterprises has seen a sharp and steady increase in revenues over the past several years; $55 million in 09, $89 million in 2010, $113 million in 2011, and $126 million in 2012. The company is on pace to see another large increase in revenues at the end of this year. As the company's monitoring and control systems, as well as its cloud-based technologies advance, MGIC is positioned to see sizable growth in both revenues and earnings over the next several years.

Conclusion

In my opinion, the three companies reviewed above (EGHT, FMNB, and MGIC) are all solid buys. I feel that the upside potential of each of these stocks far outweighs the downside risk associated with them. Each of these companies has made strategic decisions and actions to help achieve sustained growth and prosperity.

EGHT has successfully transferred the majority of its business from residential to business transactions. Through its acquisition, FMNB has continued its goal of diversifying its revenue streams with a high focus on fee income. MGIC has landed a number of high value projects such as its recent ERP project for System Advanced Laboratories that will help the company continue its high growth rates in revenue and earnings.

Source: Low-Priced Stocks Worth Buying: Round 3