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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Watch This Memory Maker: Under the Radar

Stocks in this article: STEC IBM EMC

Rumors swirling around about a potential acquisition by IBM have also played with the stock price, but there's little to suggest that any deal is in the works.

STEC looks like a steal based on earnings multiples though. The price-to-earnings ratio is at 10.2 versus an industry average of 31.8. If the stock doubled, it would be fairly valued based on these multiples. However, the stock is stuck in a volatile cycle as investors question when EMC will again call on the company to supply it with fresh parts.

The company is in no real peril because it's funded by equity, with a lofty current ratio of 7.53. The main variable is revenue growth. The company will report fourth-quarter results in early March, bringing more clarity on the stock's direction.

This is a great stock to watch in the coming weeks. Before its earnings announcement, the stock could climb in anticipation of an optimistic outlook from the company, but investors should hold off until rumors are reality. Once EMC appears ready for a second helping of inventory, STEC could take off. We rate the stock "hold." Monitor the situation closely.

-- Reported by David MacDougall in Boston.

Prior to joining TheStreet.com Ratings, David MacDougall was an analyst at Cambridge Associates, an investment consulting firm, where he worked with private equity and venture capital funds. He graduated cum laude from Northeastern University with a bachelor's degree in finance and is a Level III CFA candidate.
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