Ten dollars is a key psychological level for many stocks. Growing companies generally don't go public at less than $10 a share, while some investors think $10 stocks are "cheap" because they can accumulate more shares.

However, a company's actual value is determined by its market capitalization (its stock price multiplied by the number of outstanding shares) and its P/E ratio (its stock price divided by its annual earnings per share). Therefore, a $10 stock can actually be more expensive than a $100 stock if its market cap is much higher than its annual revenue, or its P/E ratio is frothy relative to its industry peers.

That being said, there are still plenty of decent sub-$10 stocks that trade at reasonable valuations. Here are three oft-overlooked stocks that deserve a closer examination: UMC (NYSE:UMC), Limelight Networks (NASDAQ:LLNW), and Glu Mobile (NASDAQ:GLUU).

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Image source: Getty Images.

1. UMC

UMC, a semiconductor foundry based in Taiwan, is often overshadowed by its Taiwanese rival Taiwan Semiconductor Manufacturing (NYSE:TSM). Taiwan Semiconductor (TSMC) is the world's top chip foundry by annual revenue, while UMC ranks a distant fourth behind Samsung and GlobalFoundries.

UMC makes larger and less advanced chips than TSMC, which currently leads the "process race" to create smaller and more power-efficient chips. Two years ago, UMC said it wouldn't produce any advanced chips beyond the 14 nm node, and would mainly produce less powerful chips for Internet-of-Things (IoT) and automotive applications instead. TSMC started mass producing 5 nm chips earlier this year.

UMC's retreat, which surrendered the advanced chip market to TSMC and Samsung, didn't please investors. Its revenue fell 2% last year as it missed out on the demand for high-end chips, but its earnings rose 38% as it focused on less capital-intensive processes.

In the first nine months of 2020, UMC's revenue rose 24% year over year and its earnings more than tripled. It attributed that growth to robust demand for its 28 nm and 65 nm chips, which was driven by stay-at-home demand for mobile and PC chips, and its takeover of a Japanese fabrication plant.

Analysts expect UMC's revenue and earnings to rise by 25% and 139%, respectively, this year. Next year, they expect its revenue and earnings to grow 10% and 19%, respectively, as UMC faces tougher year-over-year comparisons. UMC's stock already more than tripled this year, but it still trades at just 19 times forward earnings and pays a forward yield of 1.7% -- which makes it a worthy alternative to TSMC.

2. Limelight Networks

Limelight Networks operates a content delivery network (CDN) that provides digital media content and software for websites and apps. Its biggest customers include Disney, Roku, Tencent, and the BBC.

A network of wireless connections as seen from space.

Image source: Getty Images.

Limelight wasn't impressing many investors before the pandemic. Its revenue rose 3% last year, but aggressive investments reduced its adjusted EBITDA by 44%. It also remained unprofitable by GAAP and non-GAAP measures. Those weak numbers, along with competition from other CDN providers like Akamai and Fastly, kept the bulls at bay.

However, Limelight's growth accelerated this year as stay-at-home trends boosted the consumption of online content. In the first nine months of 2020, its revenue grew 24% year over year, its adjusted EBITDA more than tripled, and it generated a slim non-GAAP profit.

For the full year, Limelight expects its revenue to rise 15%-20%, its adjusted EBITDA to grow 55%-93%, and its non-GAAP earnings to remain positive. Next year, analysts expect its revenue and non-GAAP earnings to grow 9% and 133%, respectively -- which are high growth rates for a stock that trades at about 60 times forward earnings and less than two times next year's sales.

3. Glu Mobile

Glu Mobile's stock rallied about 60% this year as the mobile game maker's revenue soared throughout the pandemic. Its revenue rose 12% last year, thanks to the strength of Design Home, Covet Fashion, and MLB Tap Sports Baseball. Its gross margin also expanded, as it reduced its dependence on licensed games with high royalties and generated a full-year profit -- up from a loss in 2018.

In the first nine months of 2020, Glu's revenue rose 33% year over year as stay-at-home measures caused people to play more video games. Design Home and Covet Fashion continued to generate robust growth, while the strength of Kim Kardashian Hollywood offset the weaker interest in MLB Tap Sports Baseball throughout the shortened MLB season.

Glu's gross margin expanded again during that period, but its bottom line remained in the red -- mainly due to higher operating expenses in the first half of the year. For the full year, analysts expect Glu's revenue and earnings to rise 31% and 52%, respectively. Next year, they expect its revenue and earnings to grow another 10% and 27%, respectively, as new games like Table & Taste and Deer Hunter World lock in more gamers.

Based on those estimates, Glu's stock looks cheap at 17 times forward earnings and less than three times next year's sales. Those low valuations make it an undervalued growth stock, and suggest it will continue rising in 2021 and beyond.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.