While these penny stocks to buy do hold significant dangers because of their speculative nature, this market segment can occasionally deliver massive gains. Therefore, if you have your bases covered, it might not be the most terrible idea to have some exposure to high-risk, high-reward endeavors, so long as you’re doing it with money you can afford to lose.
However, you certainly want to avoid acquiring penny stocks merely because of their low price point and nothing else. Believe it or not, certain speculative market ideas carry surprisingly decent financial metrics. Using resources such as Gurufocus.com, it’s possible to filter out some of the best ideas possible based on hard data.
All of the below penny stocks rate as modestly undervalued by Gurufocus.com. As well, each carries one or more attributes that should intrigue investors seeking compelling under-the-radar opportunities. If you’re ready to roll the dice, check out these tempting penny stocks to buy.
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Wipro (NYSE:WIT) provides information technology, consulting and business process services. Currently, the company features a market capitalization of just under $26 billion. Therefore, it’s not what you would traditionally label as one of the penny stocks. Nevertheless, with a price tag under $5, it will certainly draw attention. It’s one of the top penny stocks to buy.
Wipro also features volatility not unlike penny stocks. On a year-to-date basis, WIT hemorrhaged almost 52% of equity value. However, in the trailing five days through the Oct. 26 session, WIT gained 3.5%. Therefore, sentiment could be improving, though it’s difficult to tell decisively.
Fundamentally, Wipro benefits from a modestly undervalued profile. For instance, its forward price-earnings ratio is 18 times, below the industry median of 22.7 times. Further, the company enjoys strong income statement-related metrics. Its three-year revenue growth rate stands at 14%, better than 67% of the industry. On the bottom line, Wipro’s net margin is 13.2%, ranked higher than 83% of its peers.
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B2Gold (NYSEAMERICAN:BTG) owns and operates gold mines in Mali, Namibia and the Philippines. Currently, the Federal Reserve’s efforts to unwind the monetary excesses of the coronavirus pandemic poses deflationary pressures on B2Gold. Since the beginning of this year, BTG fell nearly 17%. However, circumstances appear to be stabilizing, with shares gaining 11% in the trailing month.
Some of the enthusiasm could be due to rumors about the Fed being less aggressive with its rate hikes. Essentially, the central bank is achieving some progress in slowing economic activity, which suggests a reduction in hawkish magnitude. Presumably, some inflationary pressure may return, which fundamentally helps the case for gold prices.
Either way, B2Gold enjoys surprisingly robust financials. In terms of key growth and profitability metrics, B2Gold ranks noticeably above sector averages. As well, prospective investors should check out the company’s balance sheet. With an Altman Z-Score of 5.45 reflecting low bankruptcy risk, BTG could rank among the intriguing penny stocks to consider.
Pitney Bowes (PBI)
Pitney Bowes (NYSE:PBI) is a technology firm most known for its postage meters and other mailing equipment and services. Further, the company expanded into e-commerce, software, and other technologies. Currently, Pitney Bowes features a market cap of $509 million. Since the start of this year, PBI plunged almost 57%, reflecting significant volatility risks typical of penny stocks.
To be fair, near-term momentum swung positively, with PBI moving up almost 22%. Whether this gain reflects something greater remains to be seen. Nevertheless, what we do know is that the company features a high-quality business. Specifically, Pitney Bowes’ return on equity hits 50.5%, ranking better than over 92% of its peers. As an added bonus, Gurufocus.com rates shares as significantly undervalued. For example, PBI’s forward P/E is about 8.4 times, below the industry median of 11.4 times. Still, the one risk factor to consider centers on the firm’s balance sheet. With an Altman Z-Score of 2.51, it’s in the gray zone in terms of bankruptcy risk.
Grupo Aval (AVAL)
Based in Colombia, Grupo Aval (NYSE:AVAL) is a holding company engaged in a wide variety of financial activities, including banking, telecommunications and real estate. Presently, Grupo Aval commands a market cap of $2.75 billion. Again, this value doesn’t typically align with what you see among penny stocks. However, AVAL at time of writing trades hands for $2.32, and is another one of the top penny stocks to buy.
That’s probably going to attract speculators seeking low-priced investment units. Of course, prospective participants must acknowledge the risks involved. Since the January opener, AVAL slipped a worrying 55% of equity value. At the same time, if the company owns positive financial metrics, AVAL could be worth a shot with “dumb money.”
Turns out, Grupo Aval features a high-quality business. Specifically, its return on equity stands at 20%, ranking better than 91.5% of the industry. Also, the company’s return on asset is 1.24%, whereas the industry median is 0.96%. However, penny stocks usually carry some serious vulnerability. For Grupo Aval, it features a poor cash position and suffers from general instability in the balance sheet.
TAL Education (TAL)
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Standing for “Tomorrow Advancing Life,” TAL Education (NYSE:TAL) is a Chinese holding company that offers after-school education and tutoring for students in primary and secondary school. Currently, the company has a market cap of $2 billion, representing a mid-cap enterprise. However, it’s price at the time of writing (a penny above $4) aligns with frameworks you find with penny stocks to buy.
Interestingly, TAL shares gained 5% for the year, dramatically outperforming both the benchmark U.S. and Chinese indices. Fundamentally, one of the major highlights for TAL Education centers on its balance sheet. With a cash-to-debt ratio of 16.3 times, well above the industry median of 1.24 times, TAL may be able to absorb economic headwinds. As well, the company features an equity-to-asset ratio of 0.81 times, ranked better than 90% of its peers.
While Gurufocus.com rates TAL as significantly undervalued, investors should note vulnerabilities with the enterprise. Particularly, the company’s return on equity sits 26.5% below parity, reflecting a poor-quality business.
AXT Inc (AXTI)
AXT Inc. (NASDAQ:AXTI) is a “material science company that develops and manufactures high-performance compound and single element semiconductor wafer substrates comprising indium phosphide (InP), gallium arsenide (GaAs) and germanium (Ge).”
Currently, AXT carries a market cap of nearly $194.2 million, representing one of the smaller penny stocks on this list. Since the beginning of the year, AXTI dropped more than 50% of equity value. A majority of the fallout stems from the company’s preliminary third-quarter revenue report, which fell against prior guidance. Thus, market participants will be taking significant risks with these shares.
Still, it’s not entirely speculative. For one thing, Gurufocus.com rates AXTI as significantly undervalued. Further, the company has decent strengths in the balance sheet relative to its industry and size. Fundamentally, AXT has middling scores for both growth and profitability. Therefore, it’s one of the penny stocks that will depend on a burst of speculative fever.
Safe Bulkers (SB)
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Arguably the riskiest name on this list of penny stocks to consider, Safe Bulkers (NYSE:SB) is a shipping firm. Specifically, the company focuses on transporting major bulks, including iron ore, coal and grain and minor bulks, which include bauxite, fertilizers and steel products. Currently, the company has a market cap of $330 million. Since the start of the year, SB slipped 30%.
With fears of a global recession rising, it’s difficult to decipher where SB may end up. On one hand, the narrative involving coal and grains may become extraordinarily relevant because of geopolitical flashpoints. But on the other hand, if the Fed continues to constrain liquidity, demand for commodities may stumble. That probably won’t help SB stock.
Nevertheless, SB represents one of the penny stocks to consider for hardened speculators. According to Gurufocus.com, the underlying firm features plenty to like. For instance, the company’s key growth and profitability metrics rank well above industry median levels. Also, Safe Bulkers’ return on equity is nearly 32%, ranked better than over 85% of the competition.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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