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Top 10 Penny Stocks of 2010

2. Zanett (ZANE) is a customized IT solutions provider based in New York. Shares traded above $260 on a split-adjusted basis in June 1996, but lost most of their value through 2009, when the stock finished at 40 cents.

Closing Price: $2.09 (June 16)

Total Return (YTD): 425.1%

Developments in 2010: Zanett's stock has been on a rollercoaster ride this year. On March 3, Zanett said it would likely receive a second delisting notice from the Nasdaq after it failed to meet the exchange's minimum bid price requirement. One day later, Zanett announced the closing of over $12 million in new business during the first two months of 2010, news that sent shares up tenfold from 30 cents. Zanett said in April that it had $17.1 million dollars in new business during the first quarter. In May, Zanett reported a first-quarter net loss of 4 cents a share, swinging from a year-ago profit of 4 cents a share, as revenue fell 2% to $10.7 million. Earlier this week, Zanett said it has signed orders worth $29.7 million in 2010, with a bulk of the revenue expected to be realized within the next 12 months.

Valuation: Zanett has a book value of only 72 cents per share, giving it a price-to-book ratio of 3.20. That's above the average P/B ratio of 2.38 of the software and computer services peer group. Based on estimates by an analyst at Virtua Research, Zanett has a forward price-to-earnings ratio for 2011 of 101. By comparison, the software and computer services peer group has a P/E ratio of only 10.16 for the current year, according to Bloomberg.

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