Back in November, I wrote Round 8 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 8 were MFC Industrial Ltd. (NYSE:MIL), Office Depot Inc. (NYSE:ODP), and Two Harbors Investment Corp. (NYSE:TWO). Round 6 and Round 7 stock selections and reviews can be found here and here.
For Round 9, 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, dividend policy, and future outlook.
Stock No. 1
Advanced Semiconductor Engineering, Inc. (NYSE:ASX) is one of the world's largest independent providers of semiconductor packaging and testing services, serving areas throughout the United States, Europe, and Asia. The company was founded in 1984 and is based in Kaohsiung, Taiwan.
|Gross Profit Margin (Quarterly)||25.51%|
|Profit Margin (Quarterly)||11.72%|
|Return on Assets ((NYSE:TTM))||5.89%|
|Return on Equity||13.50%|
|Quarterly Revenue Growth (YOY)||13.37%|
Looking at the chart below, you can see that Advanced Semiconductor Engineering has seen impressive growth in both revenue and profit over the past several years.
ASX Gross Profit (TTM) data by YCharts
Current Valuation and Recent Trading Activity
Advanced Semiconductor Engineering has a current PE ratio of 13.79x and a price-to-book value of 1.75x.
You can see from the chart below that both values are in line with historical values of the stock.
ASX PE Ratio (TTM) data by YCharts
Advanced Semiconductor Engineering closed Friday at $4.62, $0.76 shy of its 52-week high and $0.75 higher than its 52-week low. It is trading below both its 50-day moving average of $4.73 and right at its 200-day moving average of $4.62.
Advanced Semiconductor Engineering has seen the following price returns:
|1 Month Price Return||-1.70%|
|1 Year Price Return||10.00%|
|3 Year Price Return||-6.36%|
For its latest quarter, Advanced Semiconductor Engineering reported earnings per share of NT$0.57 (US$0.096 per share). This was a substantial increase from NT$0.46 per share for the same period last year.
You can see from the chart below that the company has seen up and down earnings over short periods of time, but has maintained an overall upward trend over the past several years.
ASX EPS Diluted (TTM) data by YCharts
Advanced Semiconductor Engineering pays a single year dividend (as opposed to quarterly dividend payments). In 2013, the company paid a $0.1405 per share dividend that yielded just over 3%. From the chart below, you can see that Advanced Semiconductor Engineering's dividend has varied greatly and isn't an extremely reliable source of income.
ASX Dividend Yield (TTM) data by YCharts
For its current quarter, Advanced Semiconductor Engineering has reported strong monthly revenues. For December, the company reported consolidated net revenue of $725 million in US Dollars, which was a 10.8% increase over the same period last year.
While the semiconductor industry in general is a volatile and fairly high risk industry, I believe ASX is a lower risk company due to its overall business structure. There doesn't appear to be any reason to assume that the company's past increases in revenue, profit, and earnings will not continue. ASX is far from risk free, but I feel that the potential upside of this stock (along with a reasonable, if not absolutely safe, dividend) far outweighs the negative risks associated with it and the semiconductor industry in general.
Stock No. 2
Jive Software, Inc. (NASDAQ:JIVE) provides a social business software platform to businesses, government agencies, and other enterprises. Jive Software, Inc. was incorporated in 2001 and is headquartered in Palo Alto, California.
|Gross Profit Margin (Quarterly)||62.83%|
|Profit Margin (Quarterly)||-50.07%|
|Return on Assets||-25.11%|
|Return on Equity||-56.12%|
|Quarterly Revenue Growth (YOY)||29.39%|
Looking at the chart below, you can see that Jive Software has seen a fairly steady increase in both revenue and profit over the past couple of years.
JIVE Revenue (TTM) data by YCharts
Current Valuation and Recent Trading Activity
Jive Software has a PS Ratio of 4.40x and a price to book value of 5.91x.
The stock closed Friday at $9.24, $9.24 shy of its 52-week high and $0.25 higher than its 52-week low. The stock is trading below its 50-day moving average of $10.42 and its 200-day moving average of $12.35.
Jive Software has seen the following price returns:
|1 Month Price Return||-16.15%|
|1 Year Price Return||-38.40%|
|2 Year Price Return||-37.99%|
Looking at the chart below, you can see that there has been wild swings in the price of Jive Software.
JIVE data by YCharts
In 2012, Jive Software was overbought, causing a large increase in its price (jumping 75% in just over a few months). I believe that the opposite has recently happened, and feel that the stock has been oversold (dropping over 50% in the past several months).
For its latest quarter, Jive Software reported a net loss per share of $0.27, compared to a net loss of $0.18 per share for the same period last year. While earnings continue to be negative for Jive Software, there has been an improvement as the company attempts to turn earnings positive.
JIVE EPS Basic (Quarterly) data by YCharts
Jive Software does not pay a dividend.
Jive Software appears poised to continue seeing increases in revenue and profit in future years. While earnings have not yet turned positive, I believe this will change in the not so distant future. The company continues increasing spending on both research/development and sales/marketing, which has kept earnings down, but I believe will pay dividends soon. According to the company's last earnings report, this is already underway as Jive has made big strides in terms of signing new and expanding customer relationships. The company also released the Jive Fall Cloud Release, that includes a variety of new and enhanced features.
Jive Software is set to release its fourth quarter results next month. I think the numbers will fall within the company's prior guidance and will have minimal impact on the short term price of its stock. I do think the stock is currently oversold and undervalued, which is a great time to buy in my opinion. Jive is risky, but I feel that most of that risk has already been priced into its stock. I think there is a great amount of potential for this stock to increase significantly in price over the next several years, as the company's expenditures in marketing and development, lead to increased revenues and positive earnings.
Stock No. 3
United Microelectronics Corporation (NYSE:UMC) offers semiconductor wafer manufacturing services and other solutions to address the needs of foundry customers. United Microelectronics Corporation was founded in 1980 and is headquartered in Hsinchu, Taiwan.
|Gross Profit Margin (Quarterly)||21.96%|
|Profit Margin (Quarterly)||10.41%|
|Return on Assets||4.84%|
|Return on Equity||6.94%|
|Quarterly Revenue Growth (YOY)||12.50%|
Looking at the chart below, you can see that United Microelectronics has seen significant increases in both revenue and profit over the past several years.
Current Valuation and Recent Trading Activity
United Microelectronics has a current price to earnings value of 11.27x and a price to book value of 0.72x.
The stock closed Friday at $2.07, $0.37 shy of its 52-week high and $0.30 higher than its 52-week low. The stock is trading higher than both its 50-day moving average of $2.03 and its 200-day moving average of $2.05.
United Microelectronics has seen the following price returns:
|1 Month Price Return||4.55%|
|1 Year Price Return||5.61%|
|3 Year Price Return||-36.50%|
For its last quarterly report, United Microelectronics reported Earnings per share of NT$0.06, which as equal to the same period last year.
Looking at the chart below, you can see that earnings have been fairly flat over the past couple of years.
UMC EPS Basic (TTM) data by YCharts
Like Advanced Semiconductor Engineering, United Microelectronics pays a yearly dividend. Last year, the company paid a $0.474 dividend that yield 2.29%. This is similar, to past yearly dividends the company has paid with the exception of 2011 in which the dividend was significantly higher.
This year, United Microelectronics is looking to upgrade fabrication plants to increase productivity and decrease manufacturing costs in the long term. The company expects to see continued growth in both its 40nm platform as well as its specialty technologies. Currently priced below book, I think United Microelectronics is a solid buy as it has maintained positive earnings consistently and continues to improve its processes and infrastructure through increased capital expenditures. With a sustainable and fairly safe dividend, I think this stock possesses very low risk for the industry in which it operates in.
For this round, I decided to focus on tech stocks. The three companies listed above, I feel all have strong potential to grow revenue, profit, and earnings in future years. I feel that all three stocks are priced valuable and believe these stocks will reward long term investors in future years. While earnings growth haven't been a consistent feature of these stocks, I feel that the combination of increased revenues along with smart investments, will lead to growth in earnings (as well as stock price) in the future. As always I suggest any individual investor perform their own research before making any investment decisions.