Today I want to share with you seven penny stocks are all trading below $3 per share and yet appear to be good bargains right now. Some are value stocks — i.e., selling below their estimated value or net asset value. Others are speculative growth stocks. The latter group looks inexpensive based on the future prospects for the company.
Keep in mind that, as penny stocks, these ideas are highly speculative. Most defensive investors will not put a big portion of their overall investment portfolio into names like these. These investments will not have a high probability of success as well.
But here is the overall philosophy. One or two of these stocks will likely be a multi-bagger, so to speak. As a group, that could more than cover the losses in the other penny stocks.
Keeping that in mind, here is the list of seven penny stocks to buy if you are looking for hidden gems:
- Centamin Plc (OTCMKTS:CELTF)
- 9F, Inc. (NASDAQ:JFU)
- iBio, Inc. (NYSEAMERICAN:IBIO)
- Enel Chile (NYSE:ENIC)
- Ault Global Holdings (NYSEAMERICAN:DPW)
- NXT-ID (NASDAQ:NXTD)
- Sunlink Health Systems (NYSEAMERICAN:SSY)
Let’s dive in and look at these penny stocks.
Penny Stocks: Centamin Plc (CELTF)
Market Capitalization: $1.69 billion
Centamin is a London-listed miner of precious metals and gold in Egypt, Burkina Faso, Côte d’Ivoire, Jersey, the United Kingdom, and Australia. Its main asset is the Sukari Gold Mine project.
Here is why you should consider investing in CELTF stock: “Sustainable dividend policy underpinned by free cash flow.” That is the center phrase on the company’s investor relations page. CELTF has a 6%-plus dividend yield based on a dividend payment of 9 cents per share on its price of $1.46. This is the result of two dividend payments in the past year: 6 cents for the interim dividend and 3 cents for the final dividend. The most recent dividend was paid on June 15 with an ex-date of May 20.
Last year the company produced $141.8 million in free cash flow (FCF) on $828.7 million in revenue, giving it a 17.1% FCF margin. Moreover, given its market capitalization of $1.69 billion, CELTF stock has an 8.38% FCF yield (i.e., $141.8 m FCF/$1.692 billion market cap).
The dividend cost $104 million, according to Centamin’s 2020 annual report, and its financials are reported in U.S. dollars. So the dividend is well covered by the company’s FCF. This makes CELTF stock a very attractive high-dividend yield penny stock.
9F, Inc. (JFU)
Market Cap: $464 million
9F runs an online financial site that integrates and personalizes financial services in China. 9F is essentially a Nasdaq-listed Chinese fintech that provides online lending, wealth management, mutual funds, payment services and other fintech-type products. 9F is also has a $464 million market cap.
Last year 9F made $192.5 million in revenue. The stock went public on Aug. 15, 2019, at $9.50 but now is down to $2.28. So far, the public company has not been profitable.
But here is why you should consider buying. It has $417.887 million in cash on its balance sheet and $59.878 million in restricted cash, for a total of $477.765 million. This can be seen on page 5 of its 20-F annual report. This is greater than its market value of $464 million, essentially valuing the company at less than nothing.
All it is going to take is for some fund to take a run at the company and liquidate it by selling the online business. It’s not clear what that is worth now, but clearly, it probably worth something like at least one or two times sales. For example, at 2 times sales, plus its cash per share, the company is worth $385 million, plus $477.8 million, or $862.8 million. That is 85.95% more than today’s price or $4.24 per share.
There is no guarantee this will happen at all. It may take some time before anyone even decides to do this. But over the long run, JFU stock looks like it could be a very interesting liquidation play.
Penny Stocks: iBio, Inc. (IBIO)
Market Cap: $340 million
iBio is a plant-based biotechnology company and biologics contract manufacturing company. The company now has a new CEO and a new CFO and is trying to turn a page after years of losing money.
In the past, I have written very negative articles on IBIO stock, especially given its huge dilution and Covid-19 drug attempt. But now the company has $103.9 million in cash as of March 31 or over 30% of its market cap. The company now says it has enough cash to fund its planned operations at least through March 31, 2023. This includes investment in its FastFarming Discovery Platform and potential in-licensing activities.
Expect the new management to turn things around and make the company profitable before then. I believe they realize the stock is not going to move without that happening. This is what a recent Seeking Alpha author wrote about the new management and the “reset” that the company will undergo. According to the article, the turnaround will be based on:
- “iBio’s new therapeutic and vaccine focus”
- it has “established a pipeline of 4 pre-clinical therapeutics for human use” and
- “1 clinical vaccine for animal use.”
Watch iBio stock, which is at $1.59 and is up 51.4% year-to-date, but down 1.24% over the past year. If management’s attempts to turn the company around are successful, the stock will be significantly higher.
Enel Chile (ENIC)
Market Cap: $4.01 billion
Enel Chile is an NYSE electric utility that has a $4 billion market cap and a very high dividend yield. It generates, transmits and distributes electricity throughout Chile. At the end of the year, it had 7,200 megawatts of installed capacity with 109 generation units. It has 2 million customers throughout 33 municipalities of the Santiago metropolitan region. It generates electricity with hydroelectric, thermal, wind, solar and geothermal power plants.
In addition, Enel Chile has very good, consistent earnings growth. For example, this year analysts estimate earnings per share (EPS) is 43 cents per share, based on data from Seeking Alpha. So at a price of $2.91, its forward price-to-earnings (P/E) multiple is just 6.8 times EPS. Moreover, next year, EPS is forecast to grow 13.9% to 49 cents per share. That makes it incredibly cheap at 5.9 times EPS.
Enel Chile pays an annual dividend of 21 cents per share. Given its price today (June 25) of $2.91, its dividend yield is 7.2%, which is very high.
This is a perfect long-term value investor’s penny stock with a low P/E, good earnings growth, and a high dividend yield.
Penny Stocks: Ault Global Holdings (DPW)
Market Cap: $143 million
Ault Global is essentially a microcap investment company run by one major former broker named Milton Ault. It is a collection of cash, minority stakes in public stocks, and wholly owned private companies that Mr. Ault has chosen as investments. For example, revenue comes from defense solutions companies it owns under the umbrella name of GWW (including Gresham Power, Microphase, Enertec, and Relec). In addition, it owns a commercial electronics solutions company called Coolisys, and several other companies including a crypto mining company that it is growing in Michigan.
As of March 31, the company had $107.8 million in cash and $18.15 million in marketable securities, as can be seen on page F-1 of its latest 10-Q filing. That is a total of $125.95 million and 86.8% of its $145 million market cap. This leaves Ault Global’s private companies worth close to nothing. But the private companies generated $13.244 million in revenue in Q1.
For example, at 7 times revenue, that would give the companies a valuation of $92 million. Added to the $126 million in cash, that puts Ault Global’s net asset value at $218 million. Now, even if we deducted the total of $57.5 million in current and long-term liabilities, its net asset value would be $160 million. This would still be 12% above Ault Global’s market value of $143 million.
However, it is not necessary to deduct these liabilities, as they are actually part of the value of the companies that comprise the $92 million valuation. This means DPW is worth $218 million, or 50% more than its $145 market value. This puts the value of DPW stock at $4.32 per share, 50% above its current price of $2.88.
Market Cap: $53 million
Nxt-ID, Inc. provides solutions for payment, the Internet of Things (IoT), and biometric security and sensor technologies. It has extensive experience in access control, biometric and behavior-metric identity verification, security and privacy, encryption and data protection, payments, miniaturization, and sensor technologies and healthcare applications. Its main company is LogicMark, which sells non-monitored and monitored personal emergency response systems.
The company had sales of $11.4 million in 2020. Given that the market cap is $53 million, it trades for a little over 2 times forecast sales for 2021. Recently the company prepaid down $3 million on one of its loans, which will save it $400,000 in interest annually. On June 14, the company appointed a new CEO. She used to work as CEO and co-founder of LookyLoo, Inc., an artificial intelligence social commerce company.
As of March 31, the company had $8.5 million in cash and $2.43 million in sales for the quarter ending March 31. The company’s operations were severely impacted by Covid 19 but should begin to return to normal over the next year. this is a highly speculative play. It trades for less than $1 and may take some time to move higher. Beware of the risks.
Penny Stocks: Sunlink Health Systems (SSY)
Market Cap: $20 million
Sunlink is a hospital and pharmacy company based in the southeastern U.S. It also owns land. Recently Ault Global (see above) took a 9.99% stake in the company.
It has an 84-bed community hospital, including an 18-bed geriatric psychiatry unit and a 66-bed nursing home in Houston, Mississippi. The company is headquartered in Atlanta.
As of March 31, it had $11 million in cash and $4 million in receivables, according to its latest 10-Q filing. The market cap for SSY stock is just $20.2 million. This means that its hospital and pharmacy have an implied value of just $5 million. But in calendar Q1 alone it had $9.8 million in sales. On a cash flow basis, the company was at breakeven. In other words, the hospital and pharmacy are likely worth well more than $5 million.
In addition, the balance sheet also includes $19.35 million in depreciated property, plant, and equipment. This includes 25 acres of unimproved land in Ellijay, Georgia, and 5 acres of unimproved land in Houston, Mississippi.
So after deducting $2 million in debt, and adding in $15 million in cash and receivables to the $19.35 million in PP&E, its net asset value (NAV) is $32.35 million. And that is before including the value of its nursing home and pharmacy, which did $41 million in sales in the 12 months ending March 31. Therefore, even at 33.33% of sales, it is worth $13.66 million.
That means the total NAV is worth $346 million. This is over 128% more than its market value of $20.2 million. In other words, SSY stock is worth $3.73, compared to its price on June 25 of $2.92 per share. Maybe the Ault Global stake will act as a catalyst to help unlock this value.
One More Runner-Up for Penny Stocks that are Hidden Gems
I have shown how these penny stocks are worth significantly more than their present price. Investors in these penny stocks as a group will probably do well over time.
I would like to mention one more, although somewhat controversial stock that you should carefully look at: Salem Media Group (NASDAQ:SALM). This is a conservative radio broadcast stock trading at $2.60 ($68 million market cap) that recently told analysts on its conference call that it expects revenue to jump between 13% to 15%.
But the real reason to own the company is that it generated $10.3 million in FCF in the LTM to March 31, according to its latest investor slide deck (page 5). Therefore, given its $68 million market value, the stock has an FCF yield of 15.1% ($10.3 million / $68 million). This is extremely high. A major catalyst coming up is that next year is an election year, along with the Gavin Newson recall campaign later this year. Expect to see SALM stock move significantly higher as a result.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Mark R. Hake did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.