Penny stocks are penny stocks for a reason. They have become penny stocks, meaning below $5 a share, because investors have ruled the market. They have overpowered the buyers.
Many of the companies that trade in this risky area of the market are destined for bankruptcy. Most of them are actually losing money and a good number of them will never turn a profit. The majority of them aren’t even followed by the investment banks of Wall Street that analyze and provide research on them.
The following seven penny stock companies are all followed by The Street. This means their teams of analysts study the companies and try to determine what the company is worth. They use a number of metrics, like the price-to-earnings (PE) ratio or the price-to-sales (PS) ratio.
Many of these analysts often have relationships with senior people of the companies and speak to them about issues pertaining to the companies. The good analysts will also talk to the company’s customers, suppliers, and anyone else who could give insight.
These seven companies are trading as penny stocks right now. But they may rally and leave the penny stock universe soon. The analysts that follow them all believe that the shares are undervalued at current levels.
- Opko Health (NASDAQ:OPK)
- Athenex (NASDAQ:ATNX)
- Bellus Health (NASDAQ:BLU)
- Catalyst Pharmaceuticals (NASDAQ:CPRX)
- Spectrum Pharmaceutical (NASDAQ:SPPI)
- Newage (NASDAQ:NBEV)
- Uranium Energy Corp (AMEX:UEC)
Seven Undervalued Penny Stocks: Opko Health (OPK)
Opko Health is a healthcare company in the diagnostics and pharmaceuticals businesses. Headquartered in Miami, Florida, the company was incorporated in 1991 and operates internationally.
As you can see on the chart above, Opko’s share price started 2021 at roughly $4. Then in early February shares reached $6. Since then they have been in a steep downtrend and are currently trading around $4 again.
The Street thinks the stock can double from here. The consensus rating is a buy with an average target price of $8 a share.
A reason for their bullishness could be the high level of short interest. When it was last reported, it was nearly 12x higher than the average daily volume. Eventually, all of these shorted shares will need to be repurchased. This could drive the price higher.
Athenex is a biopharmaceutical company that researches, develops and sells various therapies for the treatment of cancer and related conditions. It has customers in North America and Asia. Based in Buffalo, New York, the company was founded in 2003.
Like most biotech companies, shares of Athenex are volatile. As you can see on the chart, they recently went into a freefall thanks to a rough earnings report. The company posted a fourth-quarter loss of 43 cents a share. It goes without saying that some investors weren’t too happy. They knocked it down from $12 to $4.
But in doing so, they may have created an opportunity for others.
Athenex is followed buy five research firms. The consensus rating is a buy with an average target price of $10.50, over double the price of current share prices.
Bellus Health (BLU)
Bellus Health is a clinical stage biopharmaceutical company that develops drugs and therapeutics for the treatment of chronic cough and other hypersensitization disorders. Bellus was founded in 1993 and makes its home in Laval, Canada.
Like Athenex, Bellus has shown extreme volatility. As you can see on the chart, back in early July the shares plunged from $12 to about $2.50. This was due to a disappointing test result from a new drug it developed. Since then it has trended higher and is currently trading around the $4 level.
But even with this recovery, shares may still be significantly undervalued.
Three of the Wall Street investment banks follow Bellus and write research reports on it. The consensus rating among them is a strong buy, with an average target price of $9 a share. That’s about 122% higher than where they are currently trading.
Catalyst Pharmaceuticals (CPRX)
Catalyst Pharmaceuticals is a biopharmaceutical company that focuses on developing and commercializing therapies for people with rare neuromuscular and neurological diseases. Operating in the U.S., it’s based in Coral Gables, Florida. It was founded in 2002.
Over the past two weeks, shares of CPRX have dropped over 20% from $4.50 to $3.50.
But as they say on Wall Street, “If they liked it at $4.50 then they’ll love it at $3.50,” an old joke referencing professional analysts being wrong about the direction of a stock.
In the case of Catalyst, if the analysts are correct, there could be a big move up shareholders would be happy about. Four firms follow Catalyst. The average target price is $7.40, about double the current price.
Spectrum Pharmaceutical (SPPI)
Spectrum Pharmaceuticals is a biopharmaceutical company. It develops and commercializes oncology and hematology drug products. Spectrum changed its name from NeoTherapeutics back in December 2002. The company was founded in 1987 and is headquartered in Henderson, Nevada.
As you can see on the above chart, shareholders of Spectrum have had a rocky ride. From May through December of last year the price more than doubled when they broke $5 a share. But since then they have sold off and are currently trading around $3.25.
The three Wall Street firms that follow Spectrum currently have buy ratings on it. The average target price is around $10 a share, 200% higher than the current price.
New Age Beverages develops, sells and distributes healthy liquid dietary supplements and beverages. Products include specialty and organic tea, coffee, kombucha, energy drinks, relaxation drinks and coconut waters. The company was founded in 2010 and is based in Denver, Colorado.
As you can see on the above chart, last May the stock was trading $1-$1.50 a share. It slowly trended higher to reach a high of $4.50 in February. But then the stock got crushed after a disappointing earnings release. Shares dropped from $4.50 back to $2.50 in just a few days.
But the Street thinks the selling was overdone. Three firms have buy ratings on it with an average target price of $5 a share. If shares were to get there, investors would nearly double their money.
Uranium Energy Corp (UEC)
Uranium Energy locates, mines and processes uranium and titanium concentrates. The company operates in the United States, Canada, and Paraguay. Its current market capitalization is about $450 million.
As you can see on the above chart, shares of UEC have performed very well. Since November the price doubled from $1 to $2. Back in 2011, they traded as high as $7 a share. Of course, there is no guarantee that they will ever get back to that level. But there there is a chance that the stock continues to rally.
UEC lost money last year. It is also predicted to lose money this year. However, analysts believe that the company is going in the right direction. They expect a small profit in 2021.
Five firms follow Uranium Energy. The consensus rating is a buy. The average target price is $2.81. That’s more than 20% higher than the current level.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
At the time of this publication, Mark Putrino did not have any positions (either directly or indirectly) in any of the aforementioned securities.