Investing in oversold penny stocks nowadays starts with one elementary question: Is it prudent to assume more risk to get a well-risk-adjusted return in a bear market? The logic says it depends on the economic conditions.
We know that we should expect more interest rate hikes soon. JPMorgan Chase (NYSE:JPM) CEO Jamie Dimon is one of the prominent voices warning about the negative consequences of inflation as the market has tumbled.
Still, some losses in the market haven’t been fully justified. Here are three oversold penny stocks that have seen severe losses in 2022. Each one can rebound. They present strong fundamentals and are very attractive, not based on their technical analysis, but on the underlying strength of their business and financial performance.
|WLMS||Williams Industrial Services||$1.33|
Pitney Bowes (PBI)
The stock has losses of about 37% in 2022. One big reason to like it now are a rather stable sales growth that has been increasing over the past two years and the firm returned to profitability in 2021.
Additionally, in Q1 2022, the firm had a beat on both earnings per share (EPS) and revenue. The EPS GAAP of 12 cents was a beat by 10 cents, and revenue of $926.94 million was a beat by $5.88 million. The firm has beat EPS estimates in three out of the last four quarters, which shows momentum in profitability.
The company also has some good news in its financial metrics. The forward price-to-sales ratio of 0.19 is very low, signaling an undervalued stock.
The stock trades at a trailing 12-months (TTM) price-to-earnings (P/E) ratio of 14 and has a rich forward dividend yield of 5%.
Jerash Holdings (JRSH)
Jerash Holdings (NASDAQ:JRSH) “manufactures and exports custom, ready-made sport and outerwear from Jordan.”
Some of its customers include leading names like The North Face, Timberland, New Balance and Adidas.
JRSH stock has losses of nearly 19% in 2022 despite the business having a solid financial performance. The sales growth has been strong; in fiscal year 2022, it increased 58.91%, and net income surged 90.85% to $7.92 million. Jerash Holdings shows consistent profits and a free cash flow trend that, except for 2021, is positive in the past five fiscal years.
The stock trades at a TTM P/E of 7.8 and has a forward dividend yield of 3.9%. The 1-year target estimate is $9.67, a potential gain of 84%.
The forward P/S of 0.4 makes JRSH stock a cheap stock worth your attention.
Williams Industrial Services (WLMS)
Williams Industrial Services (NYSE:WLMS) is a firm specializing in providing construction and maintenance services. Some of its services include asbestos & lead abatement, fire protection, hazardous paint removal, insulation and specialty welding.
The shares are down nearly 56% in 2022, and this presents a very attractive risk-adjusted investment opportunity. The firm has a robust revenue trend that is rising for the past four years and has found its way to deliver profits since 2019.
The valuation for the stock is bullish, and the forward P/S of 0.11 and the forward price-to-book ratio of 0.92 make it a bargain now. The 1-year target of $6 would mean a gain of 351% from its current price. There is a lot of potential in this penny stock to make a strong rebound.
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On the date of publication, Stavros Georgiadis, CFA 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.