Penny stocks have a horrible reputation for the most part and it’s not necessarily undeserved. Too many times, charlatans hawk their junk securities, often in the over-the-counter market where regulations are far less stringent than in actual exchanges. However, you can occasionally find diamonds in the rough.
Don’t misread this: investing in penny stocks always carries significant risks over well-recognized entities featuring established businesses. At the same time, investors today have thousands upon thousands of publicly traded enterprises to consider. It’s just not possible for individual market participants to research every idea. Some names simply fly under the radar. Plus, not all speculative enterprises are built the same. If you have some loose change lying around, these penny stocks with strong financials could be worthwhile.
Taitron Components (TAIT)
An exceptionally relevant example of potentially high-return penny stocks, Taitron Components (NASDAQ:TAIT) distributes a wide variety of transistors, diodes, and other discrete semiconductors, optoelectronic devices, and passive components. Per its public profile, Taitron distributes these products to electronic distributors, original equipment manufacturers, and contract electronic manufacturers who incorporate the components in their products.
Since the beginning of this year, TAIT is on track to be one of the most profitable penny stocks, at least in terms of shareholder returns, with the security up over 16%. In the past 365 days, TAIT gained nearly 14% of its equity value. Enticingly, Taitron – while not a perfect enterprise – commands excellent strengths in the balance sheet. Specifically, it incurs zero debt, affording it enormous flexibility. Its Altman Z-Score – a measure of fiscal stability – is off the charts at 14.69. Therefore, it decisively ranks among penny stocks with strong financials. Lastly, TAIT trades at a price-earnings-growth ratio of 0.77 times. In contrast, the sector median stands at a loftier 1.31 times.
Baytex Energy (BTE)
For those interested in investing in penny stocks but don’t want to take overly wild risks, Baytex Energy (NYSE:BTE) offers an attractive argument. According to its corporate profile, Baytex engages in the acquisition, development, and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford property in the U.S.
Since the Jan. opener, BTE fell nearly 20%. Also, in the past 365 days, shares gave up over 26% of equity value, igniting concerns often associated with penny stocks. To be sure, global hawkish monetary policies aimed at curbing inflation haven’t helped the broader hydrocarbon industry. However, social normalization trends – particularly the gradual return to the office – should help bolster roadway traffic volume. If so, more demand could pour into entities like Baytex, making it one of the profitable penny stocks.
Currently, Baytex features decent stability, as evidenced by its Altman Z-Score of 5.55. Also, its three-year revenue growth rate on a per-share basis clocks in at 16.5%, ranked better than 63% of its peers.
Ocuphire Pharma (OCUP)
Another intriguing idea for those investing in penny stocks, Ocuphire Pharma (NASDAQ:OCUP) is a clinical-stage ophthalmic biopharmaceutical company focused on developing and commercializing therapies for the treatment of several eye disorders. Per its public profile, Ocuphire’s pipeline currently includes two small-molecule product candidates targeting the front and back of the eye indications.
To be clear, clinical-stage biotechnology firms tend to be extremely wild. Still, since the start of the year, OCUP gained almost 16% of its equity value. In the trailing one-year period, OCUP swung up over 105%. Still, investors should be aware that in the past five years, shares hemorrhaged almost 95%.
That being said, Ocuphire currently features a zero-debt balance sheet. Also, its Altman Z-Score clocks in at 13.31, meaning imminent bankruptcy is probably out of the picture. However, the company rarely generates revenue, meaning that investors will depend on Ocuphire’s narrative. Here’s the thing: over the past year, a few analysts have covered OCUP, each of them rating shares a buy. Also, the lowest price target is $18, implying nearly 343% 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.