Finding a good stock under $10 per share is sometimes like looking for a needle in a haystack. Basically, what you're trying to find is a stock that's been beaten down but has solid growth prospects due to a transformation or a refresh; a lesser-known upstart with some competitive edge; or a stock that's simply undervalued with some kind of catalyst that will propel it forward.

Here are two examples of stocks -- both under $10 per share at Thursday morning's prices -- that you should look for in that proverbial haystack. 

MoneyGram International: A turnaround story

MoneyGram International (MGI) is a widely known, established brand that has been around more than 80 years, becoming the second-largest money transfer company in the world after Western Union. In 2006, the stock was trading at over $250 per share, but then, to make a long story extremely short, digital happened, and the company didn't adapt. The stock price hit rock bottom in 2019, trading below $1.50 per share. 

A business woman looking off to the side, smiling, as if she heard good news.

Image source: Getty Images.

But since then, the company has bounced back, fueled by investments in its mobile money transfer app, MoneyGram Online (MGO), and it is now up to more than $9 per share. The stock returned 160% in 2020 and is up 75% this year, fueled in large part by the broader shift toward contactless mobile payments that was accelerated by the pandemic.

MoneyGram sees continued growth in the MGO business, which now represents 32% of all transactions, up from virtually nothing a few years ago. In the first quarter, MGO saw 119% revenue growth year over year. With its recognizable brand and infrastructure with some 380,000 locations in 200 countries, MoneyGram has been able to rapidly expand its digital footprint to 81 countries.

Overall, revenue was up 19% year over year in the first quarter while gross profit was up 8%. The company posted a net loss of $15.4 million in the first quarter, but that's due to higher operating expenses as it invests in its digital transformation. The net loss is lower than it was the previous quarter and should soon flip back to profitability as the forward momentum continues and these investments in technology begin to pay off.

Root: A disruptor with long-term potential

Root (ROOT -4.99%) is among a new batch of insurtech stocks, which are like fintechs, but for the insurance industry. Root just went public last October and has only been around since 2015, so there is no profitability yet and a lot of questions, as there often are with start-ups. Since it started trading at $26 per share back on Oct. 28, 2020, it has been a steady ride down to its current share price under $9, including a 44% drop year to date. But now is the time to start to take a look at this stock, because it has great long-term potential.

Root is a new kind of auto insurance company, which does all its business through its mobile app. It uses behavioral telematics, a fancy word that means it tracks how you drive in real time and react to a variety of situations, to log how safe and good -- or bad and dangerous -- a driver you are, and determine your rates. Obviously, the better and safer you are, the cheaper your rates will be -- and it is all done through the app, including paying the bills and filing claims.

While other competitors are using telematics to determine pricing, among other methods, Root relies first and foremost on telematics. The more data it collects, the better the algorithms, the more predicative the models, the cheaper the pricing -- that's the idea, anyway. It also vows to eliminate the use of credit scores in pricing, which the company says is "unfair and discriminatory." Through its technology and approach, it seeks to revolutionize this highly competitive industry to make car insurance more fair, cheaper, and the entire process much easier and quicker.

The company had a net loss of $99 million in the first quarter, but it has seen steady increases in written and earned premiums and declines in loss ratio. It also posted gross profit for the first time in the first quarter. The trends indicate a model that is working and given its low entry price and disruptive approach, it is one to watch.

While MoneyGram and Root have two vastly different stories, both have great potential to break out for investors. As with most stocks in this price range, they are prone to volatility as they seek to scale up or transform, but both are in great position to succeed over the long term.