The iShares Micro-Cap ETF (NYSEARCA:IWC) has surged by approximately 20% in the past six months, illustrating the optimism among risk-seeking investors. However, key variables suggest a correction in risky asset prices might occur. For instance, the Federal Reserve has announced a reduction in its tightening program, which conveys an implied economic slowdown. Moreover, the S&P 500 Volatility Index is below its long-run average of 21, and mean reversion will likely happen, concurrently wrecking high-risk assets.
As stated above, I have a negative outlook on risky stocks. Nonetheless, I do anticipate a rebound following a temporary market downturn. If you share my opinion, then you might want to consider buying these three penny stocks after their prices have declined.
Workhorse Group Inc. (WKHS)
Workhorse Group (NASDAQ:WKHS) is an all-electric durable goods producer specializing in vehicles, drones, software, and advanced infrastructure. The firm’s stock has underperformed in the past year, losing approximately 80% of its value. However, an inflection point might occur in late 2024; here’s why.
Workhorse Group’s recent capitulation was largely due to inconsistent earnings and liquidity concerns. Despite these concerns, Workhorse Group is growing at scale. For example, Workhorse’s fourth-quarter earnings report reflected $4.4 million in revenue, a 27.9% year-over-year increase. Moreover, Workhorse has reportedly entered a $129 million convertible notes agreement with an institutional investor, allowing it to bolster its balance sheet, increase its production capacity, and double down on product development.
WKHS has an alluring price-to-book ratio of 0.66x, and I believe its fundamental factors will align later this year. As such, I hold a bullish view of WKHS stock.
Aris Water Solutions, Inc. (ARIS)
Water scarcity is a serious problem, and you might not know it yet, but commercial water recycling businesses are critical to commercial sustainability. Therefore, I’d like to introduce you to Aris Water Solutions (NYSE:ARIS), a U.S.-based water recycler with a presence in the oil and gas industry.
Although Aris Water Solutions is an early-stage firm, its preliminary results show great promise. For instance, Aris’ fourth-quarter financial statements communicated $104.12 million in quarterly revenue, a 25.6% year-over-year increase. Moreover, Aris reported a net profit of $13 million, translating into a net profit margin of approximately 12.5%.
Furthermore, Aris’ execution is worth observing. The company’s latest data shows that its operating margin per barrel increased by 11% year over year, leading to a $114 million annualized increase in operating cash flow.
Aris Water Solutions has achieved operational efficiency and financial prowess merely nine years after its inception. Additionally, its price-to-earnings-growth ratio of 0.02x suggests it is an overlooked gem!
Kona Gold Beverage, Inc (KGKG)
Kona Gold Beverage (OTCMKTS:KGKG), which will soon be called NuVibe, is a beverage company that sells low-calorie energy and hydration drinks.
The firm operates in a competitive market, but its three-year compound annual growth rate (CAGR) of 69.14% suggests it is rising above its competitors. Much of its success stems from its unique flavoring and successful branding, which places it in the ‘healthy’ segment of the energy drinks market. Moreover, Kona is benefitting from its exposure to the cannabis market via its infused drinks due to cross-sales synergies.
I think Kona has great interim prospects due to the secular growth embedded in the energy drinks industry. Moreover, its acquisition of Surge Distribution opens up vertically integrated opportunities that could widen its profit margins.
Lastly, KGKG stock has a price-to-sales ratio of 0.65x, suggesting it is grossly undervalued. I would seriously consider this stock in the event of a market repricing!
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Read More:Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Steve Booyens 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.
