Before discussing the most promising penny stocks to buy, it’s important to broadcast a fundamental disclaimer: this sector is wildly risky. As an investor, you want to make sure the bulk of your money goes toward higher-probability names. And prior to that, your finances should address core needs first before engaging the capital markets. Once checking off these items, I suppose you can throw some loose change toward speculative ventures.
Still, even with the best precautions, the most promising penny stocks to buy present incredible dangers to your portfolio. Therefore, to formulate this list, I focused on securities priced no higher than $5 that trade in major exchanges. In addition, all of these ideas feature at least a consensus moderate buy rating from Wall Street analysts.
To be sure, approval from smart folks doesn’t guarantee a thing. Nevertheless, if you have your mind set on the most promising penny stocks to buy, you might as well trade with the pros. Below are compelling (but risky) names to consider.
American Well (AMWL)
Headquartered in Boston, Massachusetts, American Well (NYSE:AMWL) is a telemedicine firm. Specifically, it connects patients with doctors over secure video, selling its platform as a subscription service to healthcare providers. After falling dramatically as fears of the coronavirus pandemic faded, American Well seeks to regain its footing.
Indeed, since the Jan. opener, AMWL skyrocketed nearly 47%. Interestingly, even though it’s one of the penny stocks to buy, American Well represents one of the best-capitalized plays in this particular arena. For instance, the company commands a strong balance sheet, undergirded by a cash-to-debt ratio of 36.74 times. As well, shares appear undervalued, priced at 1.02 times book value, ranking better than 78% of the industry as a discount to book.
Currently, Wall Street analysts rate AMWL as a moderate consensus buy. In addition, their average price target stands at $4.62, implying an upside potential of almost 12%. Finally, hedge fund sentiment surprisingly rates as very positive.
SGHC Limited (SGHC)
Not exactly what you call a household name, SGHC Limited (NYSE:SGHC) is a global digital gaming company. Per its website, SGHC claims to provide first-class entertainment to the worldwide betting and gaming community. Still, prospective investors should realize that SGHC is terribly risky. In the trailing year, shares gave up 60% of equity value.
Because of the severe volatility, however, SGHC may have attracted bullish speculators. Since the Jan. opener, SGHC gained a bit over 5%. It’s not a spectacular performance but at least it’s in positive territory. Conspicuously, SGHC features excellent strengths in the balance sheet, with a cash-to-debt ratio of 13.67 times. In contrast, the sector median value sits at 0.53 times. As well, its Altman Z-Score of nearly 6 indicates low bankruptcy risk.
Still, does a robust balance sheet make SGHC one of the penny stocks to buy? Apparently, Wall Street thinks so. At the moment, analysts rate shares as a consensus moderate buy. Moreover, their average price target stands at $5, implying an upside potential of over 51%.
RLX Technology (RLX)
Perhaps a controversial idea to some, RLX Technology (NYSE:RLX) is a China-based e-cigarette or vaporizer company. Per its public profile, RLX is engaged in activities in the e-vapor industry, from scientific research, technology, and product development, supply chain management to offline distribution. While a relevant player among penny stocks to buy, it’s also volatile. In the trailing year, RLX dipped over 18% in equity value.
However, the bulls seem intent on engineering a comeback. So far this year, shares gained a pedestrian 1.2%. Still, anything can happen in the new normal. Bolstering RLX as one of the penny stocks to buy is an outstanding balance sheet. In particular, the company’s cash-to-debt ratio stands at a stratospheric 72.83 times. As well, its Altman Z-Score of nearly 12 reflects extremely low bankruptcy risk.
If that wasn’t enough, RLX trades hands at 10.2 times trailing earnings. In terms of discount to earnings, RLX ranks better than 74.29% of the competition. RLX carries a consensus (in one analyst’s view) rating of buy. The implied upside forecast? A whopping 275.5%.
Orla Mining (ORLA)
Headquartered in Vancouver, British Columbia, Orla Mining (NYSEAMERICAN:ORLA) specializes in gold-mining enterprises. Per its website, the company features assets in Mexico, Panama, and Nevada. Fundamentally, Orla Mining enjoys two major catalysts. First, the fear trade bolstered the precious metals complex, with investors turning to hard assets during these troubled times.
Second, China’s long-awaited economic reopening implies an increase in global commercial activity. In turn, this dynamic implies greater consumption of critical resources, which includes precious metals. Therefore, in the trailing year, ORLA gained a robust 31%, even though the underlying financials don’t offer the greatest look. For instance, while Orla represents a profitability machine, it’s objectively overvalued relative to industry standards.
Nevertheless, Wall Street analysts rate ORLA as a consensus and unanimous strong buy. Further, their average price target stands at $5.52, implying an upside potential of over 28%. Therefore, ORLA is one of the penny stocks to buy for smart speculators.
Another Vancouver-based mining enterprise, B2Gold (NYSEAMERICAN:BTG) likewise competes in the precious metals space. According to its public profile, B2Gold owns and operates gold mines in Mali, Namibia, and the Philippines. Given the wild events of 2022, the fear trade helped bolster B2Gold’s valuation. In the trailing year, shares gained over 10% of equity value.
What prospective investors will find encouraging is that BTG continues to spark momentum in the new year. Since the January opener, BTG swung up nearly 6%. As with the other penny stocks to buy on this list, B2Gold features a strong balance sheet. Notably, its Altman Z-Score hit 6.16, reflecting a very low risk of bankruptcy.
As well, the company enjoys double-digit revenue growth and trailing-year net margins. Plus, its return on equity of 8% beats out nearly 83% of the competition. Finally, Wall Street analysts peg BTG as a consensus strong buy. Even better, their average price target of $5.60 implies an upside potential of 43.59%. Thus, it’s an intriguing example of penny stocks to buy.
Uranium Energy (UEC)
Based in Texas, Uranium Energy (NYSEAMERICAN:UEC) is the largest, diversified North American-focused uranium company. Per its website, the company has two production-ready in-situ recovery mining uranium projects in the U.S. and high-grade conventional projects in Canada. Undeniably, UEC ranks among the top performers recently, with its shares gaining over 64% in the trailing year.
However, the compelling part about Uranium Energy is that it continues to build on its incredible momentum. Since the Jan. opener, UEC swung up nearly 12%. Fundamentally, the company’s biggest strengths center on its balance sheet. Featuring zero debt on its books, the uranium enterprise enjoys critical flexibility during these uncertain times.
To be completely transparent, UEC appears objectively way overvalued. Nevertheless, Wall Street analysts believe strongly in UEC, rating it a consensus and unanimous strong buy. As well, their average price target of $6.92 implies an upside potential of over 65%. Therefore, it makes a compelling case for penny stocks to buy.
Denison Mines (DNN)
Concluding this list of promising penny stocks to buy in Feb. is another nuclear energy-related company, Denison Mines (NYSEAMERICAN:DNN). Based in Toronto, Canada, Denison is a uranium exploration, development, and production company. Due to the massive disruption of the energy paradigm in 2022, DNN rose to incredible prominence. In the trailing year, shares gained almost 27% of equity value.
Just as well, most of this positive momentum arrived recently. Since the January opener, DNN gained nearly 29%. As with the other penny stocks to buy, Denison surprisingly enjoys a robust balance sheet. For instance, its cash-to-debt ratio stands at nearly 110 times, beating out over 74% of the industry. As well, its Altman Z-Score of 7.83 indicates very low bankruptcy risk.
For full disclosure, Gurufocus.com warns that Denison appears significantly overvalued. Objectively, its trailing multiple of nearly 179 appears toasty. However, covering analysts remain undeterred, rating DNN a consensus strong buy. As well, their average price target of $2.46 implies an upside potential of 72%.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.