Earlier this month, I explored the world of low-priced stocks by singling out 10 attractive stocks trading for less than $10. I have put out the annual list every year since 2001, except for 2003.

I decided to pick out 10 stocks trading at a P/E ratio of 10 or less that year. Low-priced stocks are often mistaken for cheap stocks, yet companies fetching single-digit earnings multiples could qualify as value stocks.

I'll admit it. I had almost forgotten about those picks. It was four years ago. That can be a lifetime in certain stock-picking circles. Let me make up for that oversight by pulling up a chair to see how those stocks have panned out.

2/28/03

2/26/07

Gain/Loss

Jakks Pacific

$10.95

$25.24

131%

Meritage Homes

$15.80

$40.35

154%

OCA Inc. *

$11.10

Nil

(100%)

Salton

$10.13

$2.65

(74%)

Investment Tech. Group

$12.59

$42.37

237%

MTR Gaming

$5.71

$13.26

132%

Group 1 Automotive

$23.03

$48.36

110%

Right Management **

$11.70

$29.97

156%

Royal Caribbean

$13.55

$41.55

207%

ESS Technology

$6.48

$1.31

(80%)

Average

87%

S&P 500

72%
*OCA filed for bankruptcy in January of 2006.
 **Right Management was acquired for 0.3874 shares of Manpower. Price is based on Manpower's close of $77.36 yesterday.

Wide left, wide right
The results are surprising. It's not that my picks beat the market. To be fair, it's been a value investor's market over the past four years, so I would expect that 87% to 72% advantage over the market as a whole. What really intrigues me is how it was feast or famine, even among a basket of stocks that seemed to be cheap at the time.

There was no middle ground here. Three stocks imploded, none more disastrously than Orthopedic Centers of America. The company hadrode an accounting scandal-riddled run into bankruptcy court.

However, the other seven stocks went on to more than double over the past four years. Leading the way was Investment Technology Group (NYSE:ITG). The electronic trading enabler has simply been in the right place at the right time in a stock-happy world.

Royal Caribbean (NYSE:RCL) has also more than tripled. The cruise ship industry has benefited from some nifty trends. Consolidation has kept price wars in check while an expansion into new ports and bigger ships has brought in a wider, and younger, crowd of former landlubbers out on the deep blue seas.

Meritage Homes (NYSE:MTH) rode the housing boom higher. The southwestern homebuilder naturally stumbled when the bubble popped last year, but it is still trading comfortably ahead of its 2003 price.

JAKKS Pacific (NASDAQ:JAKK) successfully grew its portfolio of licensed toys, broadening its appeal beyond its roots as a specialist in action toys for boys. MTR Gaming (NASDAQ:MNTG) hit the jackpot as gambling blossomed outside of the Las Vegas and Atlantic City hotbeds. Group 1 Automotive (NYSE:GPI) thrived by growing in the fragmented car dealership sector.

Then we had Right Management. The company's success in outplacement services, talent management, and organizational consulting business led to a buyout offer from Manpower (NYSE:MAN) just nine months after I recommended it. The deal was worth 60% more than what Right was trading for when I wrote the article, but it's a good thing that the buyout was in stock instead of cash. Manpower continued to acquire cheaper rivals in earnings accretive deals.

More manpower, less Manpower
The acquisition of Right Management wound up being the only buyout of the bunch. That's surprising to me. One of the benefits of snapping up undervalued stocks is that competitors often swoop down like vultures.

It didn't happen here -- or, at least, it hasn't happened yet. Can more of these stocks get bought up at respectable markups in the future? It's probably best to see how these stocks stack up to that forward earnings multiple at this point.

Monday's stellar report out of JAKKS found the toy maker issuing guidance of $2.39 for 2007. That would price it at just 10.6 times forward earnings. That's close to the old height stick. Can we get any lower?

Meritage is priced at less than five times last year's profits, but earnings will fall precipitously in 2007. On a forward basis, Meritage is trading at a pretty lofty 21 times earnings. Group 1 is the only one that is close to a single-digit multiple. It fetches 11.7 times this year's bottom-line forecast, but just 10.5 times next year's Wall Street target. Royal Caribbean is trading for 11.6 times next year's projected earnings.

But I don't see that as discouraging. The market has come around. It has newfound appreciation for the seven winners. The stock prices have grown at a quicker pace than their profitability spurts. That may not be sweet music to a value hound's ears.

However, it is vindication.

Here's a road map to some small stock ideas:

If you like your value stocks like you like your Twinkies -- deep-fried -- come check out the bargain-priced stocks being sliced and diced to golden-brown perfection in the Inside Value newsletter service. Cheapskates can even get in on a free 30-day trial offer.

Longtime Fool contributor Rick Munarriz doesn't usually wait four years to see what it's like on the limbs he's ventured out on. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.