There are thousands of U.S.-listed stocks categorized as penny stocks, or stocks trading for $5 per share or less but only a few can be considered strong buy penny stocks.
“Penny stock territory” contains a lot of busted growth stories, fallen angels and value traps, yet dive deep enough into the space, and you’ll find plenty of asymmetric opportunities. In other words, stocks where upside potential vastly exceeds downside risk.
There are both growth and value plays within this category. The common denominator is that each of these stocks has one or several potential catalysts that could dramatically increase its respective underlying value.
While not all of them will live up to this potential, and in fact quite a few will miss the mark entirely, in the aggregate owning a basket of such stocks has the potential to produce stunning returns. With this in mind, let’s take a look at seven strong buy penny stocks and why risk-hungry investors should consider buying them today.
Broadwind (BWEN)
Broadwind (NASDAQ:BWEN) is a manufacturer of industrial equipment used in clean energy infrastructure like wind turbines. Outside of the “green wave stocks” boom of 2021, and the smaller boom in such stocks around the time the Inflation Reduction Act was passed by Congress last year, BWEN has delivered a mixed performance.
However, lately BWEN stock has again been on a tear for reasons more company-specific in nature. That is, investors have jumped back into BWEN due to positive surprises with equipment maker’s fiscal performance. Last quarter, the company beat on revenue and unexpectedly reported positive GAAP earnings. Broadwind also reported a 43.5% sequential increase in orders.
BWEN bolted from just over $2 per share to nearly $4 per share since this well-received earnings release but the potential for additional upside remains. Forecasts call for Broadwind’s earnings to increase sixfold next year, to 36 cents per share. Such an improvement may prove sufficient to send the stock to even higher prices.
Elite Pharmaceuticals (ELTP)
In the past, I’ve named Elite Pharmaceuticals (OTCMKTS:ELTP) as being one of the strong buy penny stocks. As discussed previously, shares in this over-the-counter (OTC) listed pharma firm delivered an incredible performance during 2023. During that time frame, ELTP went from 3 cents to 14 cents per share.
ELTP stock has continued to gain this year, albeit at a far slower pace compared to the preceding year. However, don’t assume that the rate of price appreciation will continue to slow down to a trickle. Why? The company justed received Food and Drug Administration (FDA) approval for a generic methotrexate drug product. Methotrexate is an anti-rheumatic drug with a total annual addressable market estimated at $64.3 million.
That may sound like chump change for big pharma, yet for micro-cap ELTP it could really be a game-changer in terms of its operating performance in the years ahead. Last year, Elite’s revenue totaled just $47.3 million. The stock currently trades at an inexpensive 10.8 times trailing 12 month (TTM) earnings. Alongside the prospect of rising in line with increased earnings, there may be potential for shares to be re-rated to a higher valuation.
E2 Open Parent Holdings (ETWO)
E2 Open Parent Holdings (NYSE:ETWO) has more than doubled since October, but the incredible run in this supply chain management software purveyor may not be over. Shareholder activism and buyout rumors have been a major factor behind ETWO’s strong performance during this time frame.
In March the company announced it was beginning a “strategic review,” which may include a sale of the company. ETWO stock has traded sideways since, but any news regarding a buyout could lead to another rally. That’s not all. Even if takeover rumors ultimately fall apart, further improvement in E2 Open’s operating performance may do the trick.
As InvestorPlace Earnings reported on Apr. 29, E2 Open beat on revenue and earnings during the company’s fiscal fourth quarter ending Feb. 29. Given that this $4.50 per share penny stock previously traded in the low-teens, even a partial recovery would represent big upside.
Lesaka Technologies (LSAK)
I’ve writen multiple times Lesaka Technologies (NASDAQ:LSAK) is a one of the best fintech stocks. It is also one of the strong buy penny stocks. This South Africa-based fintech firm provides payment technology services in its home market and adjacent markets in Southern Africa. So far this year, the announcement of strategic acquisitions has bolstered confidence in the company’s turnaround.
By acquiring competitors, Lesaka is positioning itself as the leading fintech services provider for South Africa’s informal economy. The mergers will also likely produce significant cost savings, enabling the company to reach consistent profitability. While not certain, South Africa’s recent general election may explain why LSAK stock has lost momentum after surging from $3.50 to nearly $5 per share.
Uncertainty exists over the African National Congress (ANC) needing to form a coalition government. It failed to win a majority and it was unknown whether the ANC would form one with centrist, pro-business parties or with parties less favorable to business and foreign investment. However, the latest developments suggest the planned Government of National Unity will consist of the former rather than the latter.
Moberg Pharma (MBGPF)
Moberg Pharma (OTCMKTS:MBGPF) is a Sweden-based pharmaceutical company focused primarily on the development of a nail fungus treatment. Since publication of a bullish write-up by Left Field Investing last November, this obscure company in a decidedly unglamorous business has garnered increased attention among members of X’s (formerly Twitter) “Fintwit” community.
Here’s the bull case in a nutshell for Moberg. After successfully launching its treatment Terclara in its home market, Moberg is now focused on commercializing it globally. The company thus far has inked commercial partnerships in five jurisdictions, including the European Union and Canada. Given the size of the total addressable market for this treatment and its Swedish market share, Moberg’s target of up to $500 million in global product sales may be more than reasonable.
Not bad for a company with a market cap of just under $75 million. You can buy Moberg stateside in the OTC market where it trades as MBGPF stock. However, if you have access, a more liquid option may be to buy it via Moberg’s main stock market listing, on the NASDAQ OMX Stockholm Nordic Exchange.
New Gold (NGD)
New Gold (NYSEMKT:NGD) is a Canada-based gold mining company. The company’s main asset is its interest in the Rainy River mine, located in Northwestern Ontario. As you likely know, gold prices, while pulling back lately, have been rising in recent months.
NGD stock has spiked in price alongside this surge. Trading for just over $1 per share in February, New Gold is now at prices nearing $2 per share. Even if it seems that the gold rally is losing momentum, that may not necessarily be the case for NGD. At least, that’s the takeaway from the recent reiteration of an “Outperform” rating on the stock by BMO’s Brian Quast.
On May 31, the sell-sider published a bullish research note on NGD. He cited significant increases in free cash flow ahead primarily due to New Gold increasing its interest in its New Afton copper and gold mine located in British Columbia. Trading for a reasonable 13.2 times forward earnings, the opportunity for increased cash flow could lead to further price appreciation for shares. In the event gold prices keep rising, this could be icing on the cake in terms of upside potential.
Pitney Bowes (PBI)
Admittedly, Pitney Bowes (NYSE:PBI) is technically a penny stock right now. With a share price of $5.13 per share, PBI is just above what I like to call the “penny stock ceiling.” Even so, buying in now could still result in the sort of significant upside investors seek when investing in low-priced penny stocks.
As I’ve discussed numerous times in coverage of PBI stock, an activist-led turnaround could result in the significant unlocking of shareholder value. Obviously, with the stock up by 42.1% over the past year, this has already started to happen. Still, far greater upside may lie ahead. From the start activist investor Hestia Capital has estimated Pitney Bowes could eventually be worth between $11.34 and $16.33 per share.
Although Hestia and PBI still have plenty of work to do, recent developments signal they remain on track. As noted in a press release issued last month, PBI appointed a new interim CEO and announced plans to reduce annual operating expenses by as much as $100 million. It is also finalizing a strategic review that may result in a sale of one of Pitney Bowes’ subsidiaries.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Thomas Niel held LSAK. He did not hold (either directly or indirectly) any positions in the other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
