While penny stocks typically generate attention for their seductive nature, that sentiment may have faded for many investors. Amid the backdrop of bank runs and subsequent failures, the broader equities sector suffered significant volatility. Among the more questionable asset categories center on the risk-on plays, such as low-priced securities with high-risk profiles.
Still, not everyone feels pessimistic about the future stability of financial markets. Some bold contrarians might be tempted to bid up penny stocks. In some ways, the logic makes sense. If you already liked the idea of extremely risky speculation, then the market discount presumably makes this sector more attractive.
That said, you absolutely must exercise due diligence and common sense here. During downcycles, growth-oriented, narrative-driven enterprises tend to suffer if they don’t provide consistent profitability. Nevertheless, if you’re committed to tackling high-risk ventures and nothing can convince you that it’s a bad idea, then these penny stocks may offer a (slightly) higher probability of success.
RLX Technology (RLX)
Based in China, RLX Technology (NYSE:RLX) represents a leading branded e-vapor (or e-cigarette) company. Therefore, it’s a mixture of a consumer goods play with relevant innovations. Although global smoking rates have declined, many users gravitate toward e-cigarettes as a cleaner approach to “analog” cigarettes. Therefore, this brewing demand profile may lift RLX in the years ahead.
Indeed, it’s performed very well in the charts. Since the January opener, RLX gained 6% of its equity value. In the trailing year, it jumped over 24%. In contrast, the benchmark S&P 500 index slipped roughly 11% during the past 365 days.
In addition, the company benefits from certain attractive financial attributes. Notably, it features a robust balance sheet, particularly its cash-to-debt ratio of 125.56 times. In contrast, the sector median is only 1.22 times. Also, its three-year revenue growth rate pings at 62%, blowing past 92.5% of the competition.
Finally, Citigroup’s Lydia Ling pegs RLX as a buy. Further, the expert forecasts a price target of $3.15, implying a nearly 21% upside potential. Therefore, RLX may be one of the more sensible penny stocks to consider.
Orla Mining (ORLA)
Headquartered in Vancouver, British Columbia, Orla Mining (NYSEMKT:ORLA) represents a gold producer. Currently, the company features three major projects: Camino Rojo in Mexico, Cerro Quema in Panama, and South Railroad in the U.S. Since the January opener, ORLA has gained over 5% of equity value. It poked its head a half-percent above parity in the trailing one-year period.
While that’s not the most brilliant of chart performances, it certainly beats out the S&P 500. Further, despite Orla’s status as one of the penny stocks, it does feature some positive fiscal attributes. On the balance sheet, the company’s Altman Z-Score comes in at 4.19, reflecting low bankruptcy risk.
Also, its operating margin stands at 44%, ranked higher than nearly 94% of the metals and mining industry. Orla posted a trailing-year net margin of 15.66%, outpacing 78.53% of the competition. Its return on equity (ROE) is also 9.41%, better than almost 85% of its peers.
Lastly, covering analysts peg ORLA as a unanimous strong buy. Their average price target hits $5.45, implying a 25% upside potential. Thus, it’s one of the more promising penny stocks to consider.
Enel Chile (ENIC)
An energy specialist, Enel Chile (NYSE:ENIC), features operations in the segments of generation and distribution of electricity. Further, it also offers relevancy in the renewables space. Specifically, Enel manages renewable energy plants, including hydroelectric, wind, photovoltaic, and geothermal. Over time, ENIC could be a massive player, not just for penny stocks but for the broader equities space.
Interestingly, ENIC has been one of the top performers this year despite the banking sector turmoil. Since the January opener, ENIC has gained over 9% of its equity value. In the past 365 days, it moved up 45%. Gurufocus.com warned its readers that ENIC might be a possible value trap. However, on paper, it does feature some attractive financials.
Notably, its three-year revenue growth rate stands at 23.6%, outpacing nearly 92% of its peers. Its net margin is 25.43%, above 90% of the industry.
Moreover, Scotiabank recently pegged ENIC as a buy. The expert’s price target is $3.10, implying nearly 34% upside potential. Thus, if you can handle possible volatility, ENIC could be an intriguing idea for penny stocks to ponder.
Kinross Gold (KGC)
Although precious metals have recently garnered attention for their intrinsic value, that sentiment hasn’t helped Kinross Gold (NYSE:KGC). Since the January opener, KGC dropped almost 11% in equity value. In the past 365 days, the damage was much worse. Shares hemorrhaged nearly 31%, with trading activity gyrating based on the mining firm’s production stats.
Still, with the fear trade likely to blossom in the months ahead, KGC could be interesting for the extreme speculator. Emphasis must be placed on speculation. According to Gurufocus.com, Kinross may be a value trap. However, the company does enjoy a three-year free cash flow (FCF) growth rate of 27.2%, above the 74.46% of its peers.
Also, it’s worth noting that the market prices KGC at a trailing book multiple of 0.81. As a discount to book value, Kinross ranks better than 74.49% of the competition.
Turning to Wall Street, covering analysts peg KGC as a consensus moderate buy. Their average price target stands at $5.28, implying over 38% upside potential. For gold-focused speculators, KGC could be an interesting candidate for penny stocks.
A Canadian mining company, B2Gold (NYSEMKT:BTG), owns and operates gold mines in Mali, Namibia, and the Philippines.
Although penny stocks catering to the precious metals complex tend to be volatile affairs, BTG benefits from financial sector concerns. Realizing that the banking industry remains vulnerable to unrealized bond portfolio losses, astute folks will probably want to hedge their bets. Some might then consider the gold-mining industry.
Now, that’s not to say that BTG isn’t volatile because it most certainly is. Since the January opener, shares have fallen nearly 5%. Also, in the past 365 days, they lost about 19% of equity value. However, B2Gold also benefits from quite attractive financials. For instance, its Altman Z-Score pings at 5.42, indicating low bankruptcy risk.
Operationally, B2Gold’s three-year revenue growth rate comes in at 13.9%, outpacing 67% of its competitors. Its net margin is also 14.63%, above 77.4% of the industry.
Looking to the Street, covering analysts peg BTG as a consensus strong buy. Moreover, their average price target stands at $5.61, implying over 60% upside potential.
ReNew Energy Global (RNW)
Headquartered in the U.K., ReNew Energy Global (NASDAQ:RNW) represents India’s largest renewable energy company by operational capacity. Given the massive population size of India, any company operating there enjoys a large total addressable market. Further, with broader political and ideological winds favoring renewable energy infrastructures, ReNew stands on solid ground.
Still, it ranks among penny stocks, which makes RNW vulnerable to volatility. Since the beginning of the new year, shares dipped 2%, which isn’t that bad. However, in the past 365 days, they gave up almost 42% of equity value. Understandably, prospective investors may be leery about diving in, especially amid the banking crisis.
However, ReNew does feature some redeeming qualities. For instance, its operating margin stands at 65.39%, beating out nearly 96% of its peers. Also, its price-to-operating-cash-flow ratio is 2.28 times. In contrast, the sector median value is 8.13 times.
Encouragingly, though, analysts peg RNW as a moderate buy. Additionally, they anticipate shares hitting $9.50, implying almost 91% upside potential. Therefore, it’s one of the penny stocks worth a look for those who want to roll the dice.
Ginkgo Bioworks (DNA)
Finally, for arguably the riskiest idea among penny stocks on this list, we have Ginkgo Bioworks (NYSE:DNA). As the corporate name and ticker symbol indicate, Ginkgo represents a biotech firm. Specifically, it specializes in using genetic engineering to produce bacteria with industrial applications. Given its profound scientific potential, DNA is on patient speculators’ radar.
Emphasis must be placed on the word “patient.” Since the January opener, DNA dropped a staggering 16% in equity value. In the trailing year, it’s down a very worrying 56%. No one said gambling on penny stocks would be easy, and Ginkgo proves it.
Unfortunately, the financials don’t provide much encouragement. Predominantly, Ginkgo suffers from a weak balance sheet. Also, it’s a deeply unprofitable enterprise. While it features an attractive value based on sales and book value, DNA could also be a value trap.
However, a split view among analysts suggests DNA is a moderate buy. Further, their average price target stands at $3, which implies almost 126% upside potential.
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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.