Fueled by the government stimulus, most major stock market indexes in the U.S are now green, making it a great time to buy penny stocks.
While companies that trade below the $5 mark often get a bad rep, there are gains to be made if you make the right investment decisions. With a little due diligence on your part, many penny stocks remain a compelling buy despite the risk involved.
The consensus on penny stocks is mostly divisive but investors who do buy these types of stocks will argue that even a small increase in the price can result in massive gains.
As the broader markets move to an all-time high, we’ve rounded up the top 3 penny stocks to buy right now.
Penny Stocks to Buy: Eros STX (EROS)
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The Indian entertainment company, Eros, merged with US-based ETX in July. While the newly-formed company isn’t seeing its best results yet, analysts believe that it is just months away from exploding in a fast-growing market.
Eros is one of the top digital streaming platforms in India and controls nearly 59% of the market in tier 2 andtTier 3 cities. The company has one of the most extensive digital libraries for regional content in the nation along with the partnerships with Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN). This means that Eros is sitting on a gold mine and could grow at an exponential rate in the next few years.
EROS stock, currently trending at $2.73, saw a lot of volatility this year as the novel coronavirus pandemic brought the entertainment industry to a standstill. Eros STX was forced to take on debt to finance its projects, which decimated its share value.
Nevertheless, the future potential for the company is fundamentally robust. EROS stock has a market capitalization of $457 million and generated $600 million in revenue in 2019. Its stock is just trending at $2, which implies that its share price may be undervalued. Moreover, management expects streaming revenue to hit $1 billion by 2022 and its viewer base to increase to 50 million from 33.8 million by 2022.
While this is an ambitious goal, it’s worth noting that EROS STX has a growing presence in the billion-dollar digital streaming market. It also caters to a population of 1.4 billion in the fast-growing Indian economy. EROS is a great penny stock to buy before the stock surges in the next few years.
aTyr Pharma (LIFE)
It’s no secret that large biotech firms have seen increased gains in the last few months as the race to produce a Covid-19 vaccine continues. However, if you are looking to get into the biotech space on a budget, it’s also worth considering smaller but just as impressive companies like aTyr Pharma.
Although the company’s stock price is trending at just $3.91, aTyr Pharma’s innovative approach to creating therapies has many investors banking on LIFE stock in the long haul. With clinical activity at most major pharmaceutical companies back on track, aTyr Pharma is currently a lead candidate in the Phase 2 trial of ATYR1923. This drug is designed to help Covid-19 patients that have respiratory issues.
The success of this trial (results are expected to be released at the end of 2020) could create a large revenue stream for the company in the next year. In addition, aTyr Pharma has a number of promising projects in the pipeline. These include the NRP2 science to treat fibrotic lung diseases and cancer.
As reported by Yahoo Finance, analyst Hartaj Singh expects LIFE stock price to rise to $12 in the next year. The biotech boom of 2020 and the potential for aTyr Pharma to grow at an exponential rate in the future makes LIFE stock a great penny stock to buy while prices remain low.
RF Industries (RFIL)
At first glance, RF Industries stock may not look like an appealing investment opportunity. With its stock price down by 20% this year and currently trending at $4.60, investors may hesitate to buy this stock at its face value. But a peek into the fundamentals of RFIL stock shows that the company could potentially increase in value in the coming months or years.
RF Industries manufactures interconnected products for data communication including cables and energy-efficient cooling systems. These tools make daily communication possible – something that has become increasingly important in today’s remote work environment.
RFIL stock has been on the decline since its second-quarter earnings were released. Due to Covid-19 restrictions, the company was forced to delay many projects and its revenue numbers took a hit. However, investors continue to remain optimistic in the future of the business.
RF Industries produces the essential tools for communication and the rollout of 5G by major tech giants will be a major profit booster for the company. This means that although its stock value isn’t too high, it’s the perfect time to buy in and reap the benefits in the future.
The fundamentals of the business also show that the company currently has a debt balance of just $2.8 million, which comes from the PPP loans the company borrowed to offset Covid-19 losses.
The payout ratio is also low at 18%, which implies that RF Industries is retaining 82% of its profits for reinvestment into the company. RFIL stock a great penny stock to buy at its current price.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.
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