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Overview

Last week, I wrote Round 5 of this article in which I listed and reviewed three low-priced stocks that I believed were worth buying. The stocks I reviewed in Round 5 were Crown Media Holdings, Inc. (CRWN), Hawaiian Holdings, Inc. (HA), and Dean Foods Company (DF). Round 3 and Round 4 stock selections and reviews can be found here and here.

For Round 6, 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

ACCO Brands Corporation (ACCO) designs, develops, manufactures and markets office products, school supplies and paper-based time management products through its platform of brands including Swingline, Kensington, Wilson Jones, Quartet, GBC, and Day-Timer.

Financial Performance

Profit Margin 2.16%
Return on Assets 1.57%
Return on Equity 6.20%
Revenue 1.82B
Revenue per share $3.81
Quarterly Revenue Growth 0.34%

For Q2, ACCO reported revenue of $440.2M compared to $438.70M for the same period last year. ACCO's gross profit also increased from $124.30M last year to $137.1M this year.

Current Valuation and Recent Trading Activity

ACCO has a current price-to-earnings value of 20.51x and a price-to-book value of 1.27x with earnings per share of $0.33.

ACCO closed Monday at $6.84, $2.32 shy of its 52-week high and $1.04 higher than its 52-week low. It is trading below its 200-day moving average of $6.89 and right at its 50-day moving average of $6.84.

Earnings

For Q2, ACCO reported earnings per share of $0.19. This was a 4% increase from the same period last year.

Company Outlook


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Looking at the chart above, you can see that ACCO's net income is headed in the right direction. While the company has had challenges with its computer products segment (seeing significant decreases in sales), ACCO has seen overall sales increases in both its ACCO Brands North America and ACCO Brands International segments. Combined with its recent ability to increase productivity, I think ACCO's income is set to continue slowly rising.

Back in '07, ACCO's stock price traded in the mid to low 20's. While I don't see the stock getting close to that anytime soon, I think a move to 12 or 13 in the next year is certainly possible. With recent increase in EPS growth, I feel that at its current price ACCO is worth looking at as a buy as I believe the upside to this stock is far greater than any associated downside risk.

Stock No. 2

Student Transportation Inc. (STB) provides school bus transportation services in the United States and Canada. STB was founded in 1922 and is headquartered in Barrie, Canada.

Financial Performance

Profit Margin 1.46%
Return on Assets 1.21%
Return on Equity 3.12%
Revenue 404.85M
Revenue per share $1.28
Quarterly Revenue Growth 6.29%

Looking at the chart below, you can see that STB has a strong history of long term revenue and profit growth.


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Current Valuation and Recent Trading Activity

STB has a current price-to-earnings value of 281.88x and a price-to-book value of 2.60x with earnings per share of $2.30.

STB closed Tuesday at $6.32, $0.80 shy of its 52-week high and $0.57 higher than its 52-week low. It is trading below both its 200-day moving average of $6.36 and its 50-day moving average of $6.41.

Earnings

Last quarter, STB reported earnings per share of $0.02. This was the fifth time in the last six quarters that STB reported positive earnings.


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Looking at the chart above, you can see that STB went through a significant period of negative earnings, but since early 2010 has been able to display positive earnings.

Company Outlook

I believe that STB's investment in its propane autogas fleet will continue to return value and allow STB to see increased revenues and slightly increased earnings.

In no way do I think STB is a growth stock. There is really one significant reason to own the stock and that is for its monthly dividend which has remained steady for several years and currently yields over 8%. Since this is a Canadian stock it is subject to a withholding tax, but the yield is still significantly higher than the average for the S&P. With its dividend yield, recent turnaround of earnings, and strong history of increased revenues, I consider STB to be a fairly safe stock and a buy for investors looking for a solid monthly dividend.

Stock No. 3

Leapfrog Enterprises, Inc. (LF) designs, develops, and markets technology-based learning products and related proprietary content for children. Its products focus on phonics, reading, math, spelling, science, geography, history and music. LF was founded in 1995 and is headquartered in Emeryville, California.

Financial Performance

Profit Margin 14.10%
Return on Assets 25.37%
Return on Equity 33.17%
Revenue 603.72M
Revenue per share $1.22
Quarterly Revenue Growth 16.10%

LF has steadily increased its revenue and profit since the start of 2010.


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The company is on pace to see increases in both profit and revenue this year as well as both Q1 and Q2 results were ahead of the same period last year.

Current Valuation and Recent Trading Activity

LF has a current price-to-earnings value of 7.09x and a price-to-book value of 2.04x with earnings per share of $1.38.

LF closed Tuesday at $9.78, $2.17 shy of its 52-week high and $2.78 higher than its 52-week low. It is trading below its 200-day moving average of $9.51 and right at its 50-day moving average of $10.53.

Earnings

For Q2, LF reported a net loss of $0.05 per share. This was a 58% improvement from the same period last year.

Just as with its revenue, LF's net income has been on the increase for the past several years.


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Company Outlook

LF seems to be on the right path. Since struggling back in 08 and 09, the company has been able to continue its uphill climb of increased revenues and earnings. Through its recent new product offerings and partnerships, LF should be able to continue seeing increases on both fronts.

LF's stock price has decreased substantially over the past month, presenting IMO a perfect buying opportunity.


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I believe that LF is currently undervalued and consider it a buy at its current price. With LF's recent string of new products and improvements to existing profits, I think it's only a matter of time before LF gets closer to $20.

Conclusion

In my opinion, the three companies reviewed above (ACCO, STB, and LF) are all solid buys at their current prices. 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 in the future.

I think ACCO and LF are priced at a nice buying opportunity right now. STB is priced higher (based on earnings) but I feel that its relatively safe and high yield dividend make the valuation understandable. I think that ACCO and LF will see substantial price appreciation in the next few years. I don't see the same for STB, so I recommend it as a buy only for income investors interested mainly in STB's dividend. As always, I recommend individual investors perform their own research before making any investment decisions.

Source: Low-Priced Stocks Worth Buying: Round 6