I believe right now is one of the best times in years to go bargain shopping for hypergrowth penny stocks. Many explosive yet fledgling small-cap companies saw their share prices soar to unrealistic heights amidst the meme stock craze of 2021, only to come crashing down over the past year. In many cases, that’s despite tremendous ongoing progress in their underlying businesses.

However, therein lies the opportunity. Finding those diamonds in the rough with strong fundamentals and immense growth potential that are currently undervalued can be a very profitable exercise. Unlike more speculative plays, the key with hypergrowth penny stocks is identifying those poised to deliver substantial returns through rapid customer and revenue expansion. There are plenty of companies that rely on simple hype cycles or pump-and-dumps for their growth. I’m not after those.

Having said that, penny stocks do come with their fair share of risk. That’s especially true for those more cyclical stocks that lack established business models. One of the biggest pitfalls for many fast-growing yet underfunded small-cap companies is dilution. That’s because continuous secondary share offerings can reduce the ownership stake and upside for early investors.

Accordingly, in selecting hyper-growth penny stocks with multi-bagger return potential, it’s critical to assess not just the companies’ pace of growth, but also their risks tied to funding needs and potential dilution. The last thing you want is to invest in a company only to see the share price stagnate for years due to excessive dilution. With that in mind, let’s dive in!

Terran Orbital (LLAP)

Terran Orbital (NYSE:LLAP) has seen its stock decline precipitously since 2022. In fact, this stock has now lost more than 89% of its value from its peak. However, with shares appearing oversold, this is a stock worth considering. Its massive backlog and multi-year growth roadmap ahead lead me to believe LLAP stock may be bottoming out and ready for a turnaround.

Terran Orbital currently sports a market cap just north of $200 million. However, the company maintains a staggering $2.6 billion order backlog, the majority tied to a deal with Rivada Space Networks. While delays in associated pre-payments from Rivada explain most of the stock’s recent weakness, the agreement remains intact. And notably, payments are expected before year-end. Plus, even excluding the Rivada contract, Terran Orbital has over $187 million of additional contracted backlog from customers like Lockheed Martin (NYSE:LMT) and the Department of Defense.

The most exciting aspect is that management anticipates over 80% (or roughly $2 billion) of its current backlog to be converted into revenue by 2025. The stock’s current valuation bakes in essentially no upside. Thus, investors are pricing in further delays or order cancellations that I believe are unlikely given what’s locked in contractually.

Bearish investors may still question the company’s cash burn outlook. However, I expect the influx of backlog-related pre-payments and milestone achievement payments over the coming year to adequately fund operations towards cash flow breakeven targeted by 2024.

Given the stock’s astronomical pullback, I believe the risk-reward is now overwhelmingly skewed to the upside for patient investors willing to stomach some volatility. Specifically, 2025 consensus earnings per share estimates at 13 cents put LLAP at 8-times earnings just two years out. And if Terran Orbital meets half its 80% contractual backlog conversion target, 2025 sales should eclipse $1 billion. That would imply a very attractive price-to-sales multiple of only 0.2-times.

FingerMotion (FNGR)

FingerMotion (NASDAQ:FNGR) is a mobile data and payment services platform focused primarily on the Chinese market. It’s also a company that I don’t believe gets anywhere near the investor attention or premium valuation it deserves.

At first glance, the company’s top-line growth statistics jump off the page. FingerMotion has recorded staggering revenue growth in recent years. Its revenue has risen from just $1.47 million in 2019 to more than $34 million over the twelve months ending February 2023. More exciting is that the pace is not slowing down. New estimates suggest 69% year-over-year growth next year is possible. This means the company’s top line could nearly double again in FY2024, easily surpassing $126 million.

Furthermore, given FingerMotion’s capital-light model and operating leverage, net margins should expand rapidly in succeeding years. This, in turn, should drive earnings per share exponentially higher, making today’s entry point a bargain. While not without risks (operating across emerging market regions), I believe this unique mobile data and fintech play firing on all cylinders that deserves a multiple that’s at least 3-4x current levels.

Electrovaya (ELVA)

Electrovaya (NASDAQ:ELVA) is another under-the-radar stock I’ve had on my watchlist for some time. The company’s financial metrics demonstrate strong commercial traction, with sales up 145% year-over-year last quarter to $10.5 million. The company has also turned GAAP net income profitable in the past two quarters. That’s a notable feat among emerging battery manufacturers. I expect robust customer expansion and demand trends to continue driving top-line higher in the 30-50% range in the near-term.

But the most exciting growth driver lies in management’s planned capacity expansion, supporting a broader push into heavy-duty vehicle applications. This represents a vital and high-value market poorly served by existing lithium-ion technologies, where Electrovaya’s batteries offer plenty of advantages.

Trading at just 2.3-times sales while seeing improved profitability, ELVA shares discount a bright future. Earnings per share are expected to reach almost $3 in 2032, putting the company’s forward price-earnings ratio below 1-time. That’s the kind of valuation long-term investors can get behind.

Penny Stocks

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Read More: Penny Stocks — How to Profit Without Getting Scammed

On the date of publication, Omor Ibne Ehsan 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.