Investors largely focus on stocks that are listed on the main exchange. That’s natural since hundreds of high-quality stocks are listed and the trading liquidity is robust. Having said that, investors can selectively consider OTC stocks with high returns potential. This is purely from a long-term investing view.
If we scan through the OTC exchange, it’s rather surprising to note that several fundamentally strong companies are listed. As a matter of fact, there are stories that look attractive as compared to several businesses listed on the main exchanges.
It’s therefore safe to hold OTC stocks with a time horizon of three to five years. This column discusses three OTC stocks with high returns potential that look undervalued. In my view, these stocks can deliver 5x returns over the next five years.
Let’s discuss the reasons to be bullish on these best OTC stocks.
Curaleaf Holdings (CURLF)
Curaleaf Holdings (OTCMKTS:CURLF) stock has gained some momentum in the recent past with a rally of 16% in one month. I believe that it’s among the best OTC stocks with high returns potential. I would not be surprised if this cannabis stock delivers 10-bagger returns in the next five years.
A big reason to like Curaleaf is the fact that the company is already operating in 21 states in the U.S. The company seems best positioned to benefit once regulatory headwinds wane. I also like the fact that Curaleaf continues to report positive adjusted EBITDA. Further, for Q1 2023, the company reported operating cash flow of $30.6 million and a cash buffer of $115.8 million.
With high financial flexibility, Curaleaf is positioned to invest in research and development. It’s worth noting that the company has 15 new products in active pipeline for launch. Additionally, more than 50 products are in the front-end innovation process. As these products are launched, there is visibility for stellar revenue growth.
Aker BP ASA (AKRBF)
Aker BP ASA (OTCMKTS:AKRBF) is another potential multibagger OTC stock to buy. The stock looks attractive at a forward price-earnings ratio of 10.8 and offers a dividend yield of 9.18%. I believe that Aker BP is among the best oil and gas stocks to consider.
Strong fundamentals and low break-even assets are the key reasons to be bullish. For Q1 2023, Aker BP reported revenue of $3.3 billion and operating cash flow after tax of $1.7 billion. The production cost per barrel for the quarter was $7.2.
Aker is therefore positioned for robust free cash flows and once oil trends higher again, there is flexibility for dividend growth. At the same time, the company has quality assets in the Norwegian Continental Shelf. As an example, Johan Sverdrup asset will ensure sustained production growth in the next few years.
Aker BP has actively pursued acquisitions in the past. With a leverage ratio of 0.16, there is high flexibility for inorganic growth. Overall, AKRBF stock is poised for meaningful upside and is also an attractive dividend growth stock to buy.
Avance Gas (AVACF)
Avance Gas (OTCMKTS:AVACF) stock has trended higher by 45% for year-to-date 2023. The stock however looks undervalued at a trailing-twelve-month P/E of 6.5. Additionally, AVACF stock offers a robust dividend yield of 22.7%.
As an overview, Avance is engaged in the transportation of liquefied petroleum gas. The company has benefited from higher time charter rates, which has translated into robust growth in cash flows and dividend.
For Q1 2023, Avance reported time charter rate of $58,379. For the same period, the company’s daily operating expense was $8,626. Clearly, day rates are well above the break-even and this points to coming quarters of strong cash flows.
It’s also worth noting that the company reported cash and equivalents of $220 million for Q1. For the same period, the company’s loan-to-value was 55%. Financial flexibility is high and new vessels are fully funded. As new vessels come into operation, there is visibility for revenue growth.
On the date of publication, Faisal Humayun did not hold (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.
