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Typically, penny stocks represent pure market wagers appropriate only for hardened gamblers. However, every once in a blue moon, a few ideas pop up in this segment that may be worth a genuine investment. Over time, these high-risk enterprises may yield substantial rewards for early-bird investors.
Now, let’s be clear about one thing: while penny stocks don’t guarantee losses, they almost always do. Therefore, you only want to carefully invest money you can comfortably afford to lose. The comfort of course represents a different definition for everyone. Still, if the thought of losing whatever you put into these ideas keeps you up at night, that’s not comfortable.
Primarily, I speak openly about the enormous risks of penny stocks because I’m obligated to do so. However, here’s one positive framing of this sector. If you’re already about to spend money on something pointless and silly, you might as well put it to better use in the market. Again, that’s no excuse to be reckless with your funds. However, if you’re honest with yourself about the dangers, here are penny stocks to invest in for the long term.
Sol Gel Technologies
SGHC Limited (SGHC)
Source: John Brueske / Shutterstock
Tied to the global digital gaming industry, SGHC Limited (NYSE:SGHC) specializes in a somewhat controversial segment. Nevertheless, the upside opportunities ping as incredibly lucrative. According to Grand View Research, the global sports betting market reached a valuation of $83.65 billion in 2022. Further, analysts there anticipate the segment to expand at a compound annual growth rate (CAGR) of 10.3% between 2022 to 2030.
At the culmination of the forecasted period, the market should post revenue of $182.12 billion. It’s possible that SGHC could ride coattails on this compelling segment. Therefore, it ranks among the top penny stocks to speculate on for the long haul. Enticingly, the market prices SGHC at a trailing multiple of 6.48. As a discount to earnings, SGHC ranks better than 86.29% of the competition. Also, the enterprise commands excellent strengths in the balance sheet, most notably its cash-rich profile. Further, Needham analyst Bernie McTernan pegs SGHC a buy. As well, the expert anticipates shares hitting $5, implying over 29% upside potential.
Jerash Holdings (JRSH)
Source: John Brueske / Shutterstock.com
While not a particularly exciting enterprise, those seeking upwardly mobile penny stocks should consider Jerash Holdings (NASDAQ:JRSH). Per its website, Jerash manufactures and exports custom, ready-made sport and outerwear from Jordan. It features an enviable clientele list, which includes some of the world’s biggest brands. To be fair, Jerash faces pressures from the consumer economy. In the trailing year, for example, JRSH gave up nearly 35% of its equity value. On the other hand, since the January opener, shares gained over 17%. Because Jerash undergirds several top brands, it should fundamentally stay relevant.
Financially as well, the company offers an enticing profile. For instance, the market prices JRSH at a (trailing) sales multiple of 0.4. As a discount to sales, Jerash ranks better than 70.11% of the competition. Also, JRSH trades at 0.81 times its book value. For this metric, Jerash rates favorably to 66% of its peers. Recently, Michael Baker of D.A. Davidson pegged shares a buy. Also, the expert’s price target stands at $7, implying over 51% upside potential. Therefore, it’s one of the top penny stocks to put on your radar.
Source: Billion Photos / Shutterstock.com
Throughout 2022, the digital advertising space suffered a significant slowdown, impacting several top-tier enterprises like Meta Platforms (NASDAQ:META). To potentially remedy such a circumstance, AdTheorent (NASDAQ:ADTH) leverages machine learning and data science to deliver real-world value for advertisers and marketers. Given the massive explosion of interest in digital intelligence, ADTH deserves closer inspection among intriguing penny stocks.
Adding to the temptation, AdTheorent doesn’t feature the shoddy financials typically of so many penny stocks. Rather, it features outstanding strengths in the balance sheet. For instance, its cash-to-debt ratio of 8.71 times outpaces 72.32% of the competition. Also, its Altman Z-Score of 6.08 reflects a very low bankruptcy risk. If that wasn’t enough, the market prices ADTH at a trailing multiple of 3.55. As a discount to earnings, AdTheorent ranks better than 93.32% of its rivals. Looking to the Street, Laura Martin of Needham rates ADTH as a buy. As well, the expert anticipates a price target of $3, implying a nearly 80% upside potential.
Specializing in unmanned aerial vehicles (UAVs), Draganfly (NASDAQ:DPRO) bills itself as a leader in UAV-related hardware, software, logistics, and services. With DPRO, it’s one of the penny stocks aligned with a burgeoning industry. According to Allied Market Research, the UAV segment reached a valuation of $24.72 billion in 2020. By 2030, the sector could globally hit a value of $70.91 billion.
Another factor that distinguishes DPRO from other penny stocks is the discounted profile. Per Gurufocus.com’s proprietary calculations for fair market value (FMV), Draganfly rates as significantly undervalued. Objectively, the market prices DPRO at a trailing multiple of 8.42. As a discount to earnings, Draganfly ranks better than 87.86% of the competition. Further, the UAV enterprise enjoys a strong balance sheet. For instance, its cash-to-debt ratio stands at 23.54 times, above nearly 84% of the industry. Finally, Scott Buck at H.C. Wainwright anticipates that DPRO will hit $3.50 a share. This translates to over 87% upside potential.
Solid Power (SLDP)
Headquartered in Louisville, Colorado, Solid Power (NASDAQ:SLDP) is one of a number of companies specializing in advanced battery technologies. Specifically, it’s developing a novel solution that offers higher energy density than contemporary batteries while costing less than lithium ion. As global communities gradually gravitate toward electric mobility, new batteries will be crucial for success. Therefore, Solid Power could be one of the penny stocks to consider for the long haul.
To be sure, Solid Power will require patience among prospective participants. While the business grows, it’s doing so at a nominally small scale. For instance, its third-quarter 2022 earnings report revealed top-line sales of only $2.81 million. On the other hand, Solid Power’s balance sheet is quite robust, featuring a strong cash balance relative to debt. Also, SLDP prices at 1.06 times book value, a comparatively attractive proposition.
Turning to Wall Street, covering analysts peg SLDP as a hold. However, their average price target stands at $6.50, implying nearly 95% upside potential. Therefore, it’s one of the more promising penny stocks.
With advancements occurring not only in transportation and mobility but also in their underlying conveniences, speculators of penny stocks should consider tech firm Cepton (NASDAQ:CPTN). According to its website, Cepton provides state-of-the-art, intelligent, lidar-based solutions for a range of markets such as automotive, smart cities, smart spaces, and smart industrial applications.
Admittedly, Cepton will carry significant risks. As with Solid Power above, Cepton does provide revenue. However, it’s at a very small scale. For instance, its Q3 2022 earnings report revealed that revenue came in at only $1.8 million. At some point – and presumably, quickly – management must boost this figure substantially. Adding to the risks, Cepton carries so-so stability in its balance sheet. Its Altman Z-Score pings at 5.46, reflecting low bankruptcy risk. However, it’s taking on more debt than the typical enterprise within the industry. Still, Northland Securities’ Gus Richard forecasts CPTN hitting $4 a share. If so, this would imply a nearly 248% upside potential.
Sol Gel Technologies (SLGL)
One of the riskiest though promising penny stocks available is Sol Gel Technologies (NASDAQ:SLGL). A biotech firm, Sol Gel specializes in addressing rare skin diseases. To be sure, it doesn’t take a rocket scientist to understand the powerful implications of such an enterprise. Since our outward appearance carries so much influence – whether we care to admit it or not – Sol Gel commands relevance.
That’s the positive news. The not-so-great angle centers on Sol Gel’s market performance. Since the January opener, SLGL stumbled nearly 7%. And in the trailing year, shares gave up over 38% of equity value. Unfortunately, that’s just not going to cut it if Sol Gel aims to attract more than just speculators.
Now, Gurufocus.com warns that SLGL represents a significantly overvalued proposition based on its proprietary analytics. Objectively, the market prices SLGL at a trailing multiple of 21, which ranks below the sector median of 31.61. Also, Sol Gel enjoys a strong balance sheet, particularly a cash-rich account. Finally, turning to the Street, H.C. Wainwright’s Ram Selvaraju believes SLGL will hit $19 a share. If so, such a target would translate to nearly 331% upside potential.
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.
Read More: Penny Stocks — How to Profit Without Getting Scammed
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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