But as the saying goes, high returns come with high risks. That’s why penny stocks tend to appeal more to aggressive investors who also have the stomach to handle sharp swings.
While many penny stocks are too risky to invest in, a few stand out with solid fundamentals and stable business models. Tracking such names early can open the door to potential long-term opportunities.
Here are four fundamentally strong penny stocks worth watching.
#1 Sagility Ltd
The company provides end-to-end business process management (BPM) and revenue cycle management (RCM) services for the healthcare industry Its clients are mainly US health insurance companies, hospitals, physicians, and diagnostic centers.
In FY25 revenue increased 17.2% from the previous year. Revenue in dollar terms increased 14.9%. Ebitda (operating profit) increased 28.4% year-on-year, while Ebitda in dollar terms increased 25.9%. Net profit increased 37.5%, or 34.8% in dollar terms.
A big positive was the reduction in net debt from ₹2,170 crore in FY24 to ₹1,040 crore in FY25. Net debt to adjusted Ebitda fell from 1.9 (quite high) in FY24 to 0.7 (reasonable).
In fact, the company has delivered solid financial performance over the past three years.
From FY23 to FY25, revenue increased at a compound annual growth rate (CAGR) of 14.9%, and profit at a CAGR of 93.8%. Its three-year average return on capital employed (ROCE) stands at 12.4%.
The company plans to deepen investments in advanced technologies, particularly AI and machine learning, to enhance service offerings and improve client outcomes.
#2 Geojit Financial Services
Geojit Financial Services is a prominent investment services provider in India, with a growing presence in the Middle East. It offers a wide range of financial products and services, including stock and currency derivatives, and more. It also has strong client relationships in tier-2 and tier-3 towns in India.
Revenue increased 20% to ₹750 crore in FY25, while net profit rose 15% to ₹170 crore. The company’s financial performance has been strong over the past three years.
From FY23 to FY25, revenue increased at a CAGR of 30.5%, and profit at 31.5%. Its three-year average return on equity (ROE) and ROCE stand at 15% and 21.6%, respectively. The company also remains debt-free.
#3 NTPC Green Energy
NTPC Green Energy is a is a subsidiary of NTPC, one of the largest power companies in India. It develops, owns and operates a diversified portfolio of renewable energy power plants in India.
Its renewable energy portfolio encompasses both solar and wind power assets in more than six states. It has India’s largest floating solar project (100 MW capacity) at Ramagundum, Telangana. Another large solar park at Khavda with a 4,750 MW capacity is under construction.
Its portfolio comprises projects totalling 16,896 MWs, including 3,320 MW that it operates and 13,576 MW that have been contracted. The company is also expanding into green hydrogen, hydro, and energy storage systems.
The company reported 12.6% growth in revenue to ₹2,209.60 crore in FY25, while net profit rallied 38.2% to ₹474.10 crore. Its three-year average ROE and ROCE stand at 3.9% and 3.8%, respectively.
NTPC Green Energy is poised to play a significant role in its parent company’s goal of achieving 60 GW of renewable energy capacity by 2032.
#4 BCL Industries
BCL Industries is an agro-processing company with operations that spans edible oils, Vanaspati, grain procurement, ethanol, and biofuels. It operates state-of-the-art distilleries with advanced, energy-efficient, and environmentally sustainable processes, including zero-discharge units.
It reported a 32.2% increase in revenue to ₹2,720.70 crore in FY25, while net profit jumped 7.2% to ₹102.8 crore.
Over FY23-FY25, revenue grew at a CAGR of 23.2%, and net profit at 28%. Its three-year average ROE and ROCE stand at 14.3% and 16.7%, respectively. The company has a debt-to-equity ratio of 0.3.
Going forward, it plans to focus on increasing capacity at existing facilities.
Should you consider investing in a fundamentally strong penny stock?
The answer to this depends on your approach to investing and your risk tolerance. These stocks can deliver significant upside if the underlying companies have solid financials and stable operations, but they also come with higher volatility and uncertainty.
It’s important to carefully assess a company’s fundamentals, business outlook, promoter quality and corporate governance, as well as the stock’s valuation before diving in.
Happy investing!
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com