Victims of the GameStop (NYSE:GME) bubble have learned an important lesson. It seems people always conveniently forget the most important rule on Wall Street. In order to be worth money, at some point a company must make money.
That applies to our recent penny stock bubble as well. Hundreds of companies in this risky section of the market soared in December and January as day traders endeavored to out-trade the pros on Wall Street.
But the only reason many of these stocks surged higher was because they were penny stocks. Full stop. Low priced companies in almost every sector of the market ripped higher, irrespective of company fundamentals or the economy.
Now the penny stock bubble is bursting and its victims are learning the same lesson: if a company can’t turn a profit, the market will inevitably catch up with it. Many of these companies are losing significant amounts of money. That’s the reason their shares are so low priced in the first place.
Here are 7 penny stocks to buy that actually make money:
- Natwest Group (NYSE:NWG)
- Banco Bradesco (NYSE:BBD)
- BGC Partners (NASDAQ:BGCP)
- Yamana Gold (NYSE:AUY)
- Ambev (NYSE:ABEV)
- Catalyst Pharmaceuticals (NASDAQ:CPRX)
- W&T Offshore (NYSE:WTI)
Despite their reputation, not all penny stocks are destined for bankruptcy. Some companies with low shares prices may do very well in the long-term… if they can make a profit. Let’s take a look at some of the best.
Penny Stock Companies That Are Profitable: Natwest Group (NWG)
NatWest Group is a banking conglomerate providing banking and financial products to customers in the United Kingdom, the United States, Europe and internationally.
NatWest has reported a profit in each of the past four quarters. In the most recent quarter, ending September 2020, that profit was just one cent per share. But it was a profit.
In the quarter ended June 2020, it reported 22 cents a share. The quarters ended in March 2020 and December 2019 saw the company earn 6 cents and 30 cents, respectively.
For this year, consensus Wall Street estimates see NatWest earning 38 cents a share. For 2022, that’s predicted to increase to 53 cents a share. There’s no guarantee NatWest will one day appreciate and graduate from penny stock status, but being profitable is a good start.
Banco Bradesco (BBD)
Banco Bradesco is based in Brazil, providing a wide range of banking products and financial services.
In 2020, BBD posted results of 42 cents a share. Analysts predict that this will grow to 53 cents this year, 57 cents next year and 61 cents for fiscal 2023.
This company is followed by three of the biggest Wall Street Investment Banks. Bank of America, JP Morgan and Morgan Stanley all have analysts producing research about Banco Bradesco.
They believe BBD shares are undervalued and all three have it rated as a ‘strong buy.’ The target price is $7, about 45% higher than the current price level.
BG Partners (BGCP)
BGC Partners is a brokerage firm and financial technology company. It offers various brokerage products and services, including securities such as bonds, foreign exchange, equities, commodities and futures.
This company has benefited from the boom the stock market. As the market rallies, trading volume increases and that’s where BGC makes its money. As you can see on the chart above, shares have rallied from levels around $2.50 in November to levels around $4.50 at present.
The company is expected to report earnings of around 56 cents are share when it posts its full year 2020 results. Analysts expect large growth from there.
For this year, estimates are 69 cents a share. Full year estimates for 2022 are 77 cents. In 2023, that’s expected to grow to 95 cents a share.
Yamana Gold (AUY)
Yamana Gold is a gold and silver miner and producer. It has land positions throughout the Americas. It has holdings in Canada, Brazil, Chile and Argentina.
As you can see on the chart above, AUY stock dropped back below the $5 level last month. That puts it back into penny stock territory.
For fiscal 2020, the company reported earnings of 24 cents a share. The company is expected to grow over the coming years. Annual estimates for this year are 38 cents a share and 36 cents per share for fiscal 2022.
Five Wall Street firms follow Yamana and they all believe that the shares are undervalued. All five have buy ratings on AUY, with an average target price of $7.25, more than 50% higher than where it currently trades.
Chart by TradingView
Ambev S.A. produces and sells beer and carbonated soft drinks throughout the Americas.
Even in the worst times, people still buy alcoholic beverages and this has benefited Ambev, which has been able to remain profitable over the past four quarters. In the fiscal quarter ended December 2019 it reported earnings of 7 cents a share. In the March 2020 quarter, that was 2 cents. The next two quarters were the ones that ended in June and September 2020. The company earned 1 and then 3 cents, respectively.
For the full year 2020, analysts predict Ambev will earn 10 cents a share. This year that will increase to 13 cents.
14 research firms follow the company. The average rating is a hold. However, the average target price is about $3.50, more than 20% higher than where shares are currently trading.
Catalyst Pharmaceuticals (CPRX)
Catalyst Pharmaceuticals is a biopharmaceutical company. It focuses on developing and commercializing therapies for people with rare neuromuscular and neurological diseases. Its customers are based in the United States.
In the quarter that ended in September 2020, the company reported earnings of 11 cents a share. In the June 2020 quarter it was 9 cents a share. Estimates for full year 2020 earnings are around 39 cents a share for Catalyst.
This year, it is estimated that the company will earn about the same amount, around 39 cents. But in 2022, that’s expected to grow to 46 cents a share.
The Wall Street firms that follow Catalyst and provide research think the stock is undervalued. All five of the firms have it rated “strong buy” with an average target price of $7.25, 75% higher than where it is currently trading.
W&T Offshore (WTI)
W&T Offshore is an independent oil and natural gas producer. It acquires, explores and develops oil and natural gas properties in the Gulf of Mexico.
Last year, many companies in this industry lost money. WTI too, reported a loss of 26 cents a share. This was because oil prices had fallen significantly from the prior years levels around $67 a barrel.
But now the oil markets are soaring. The price of a barrel of oil was $36 in early November. Since then it has gained more than 65%. It is currently trading around $60 a barrel.
Wall Street thinks that these higher prices will return the company to profitability. WTI is expected to be about breakeven this year. Estimates are for one cent in earnings per share. But at the end of 2022, analysts predict it will report 25 cents a share in annual earnings.
At the time of this publication, Mark Putrino did not have any positions (either directly or indirectly) in any of the aforementioned securities.