7 Penny Stocks Sitting in the Sweet Spot

While penny stocks almost always attract investors’ attention at some point, they’re also wildly unpredictable and risky. Yes, some people do enjoy lifechanging profitability. But listening to these stories only and not considering the myriad failures that surround this space represents a critical consequence of survivorship bias.

Still, the reality is that people will gravitate toward penny stocks because of their “bad boy” image. To better improve the odds in your favor, I filtered out speculative trades that hit the sweet spot: these enterprises enjoy a mix of positive financial metrics and strong Wall Street analyst support. To be 100% clear, there are absolutely no guarantees here. Nevertheless, if you want to go with more substantive penny stocks, this list may be for you.

Playstudios (MYPS)

One of the more frustrating penny stocks in terms of companies deploying word salad to explain what they do, Playstudios (NASDAQ:MYPS) specializes in casino gaming apps for mobile devices. Though the narrative carries an interesting profile, since its reverse merger with a special purpose acquisition company (SPAC), Playstudios lost about 64% of equity value.

Understandably, MYPS presents a volatile framework as it operates among penny stocks. However, the company does offer some positive fiscal attributes. Perhaps most notably, it features a relatively strong balance sheet. For instance, its equity-to-asset ratio is 0.86 times, favorably above the sector median of 0.65 times. Also, its Altman Z-Score is 6.94, indicating low bankruptcy risk.

Finally, according to Wall Street analysts, MYPS represents a consensus strong buy. Out of five analysts, four of them rate Playstudios as a buy while the other rates it a hold. Moreover, their average price target comes out to $5.90, implying 62% upside potential.

Denison Mines (DNN)

A Canadian uranium exploration, development and production firm, Denison Mines (NYSEAMERICAN:DNN) is one of the most relevant ideas among penny stocks. That’s not to say it’s safer than other speculative plays. However, with geopolitical dynamics bringing the topic of energy dependency to the forefront, Denison’s importance to the nuclear power sector may help DNN.

To be fair, it’s been a rough ride recently. Since the start of this year, DNN fell nearly 12%. In the trailing year, it gave up 43% of equity value. As well, its operational stats – such as its three-year revenue growth rate slipping into negative territory – leave much to be desired. However, the positive is that Denison commands a cash-rich balance sheet. Plus, its Altman Z-Score pings at 5.58, indicating low bankruptcy risk.

Lastly, TD Securities’ Craig Hutchison pegged DNN as a buy. The expert forecasts that DNN will hit $1.64, implying over 67% of upside potential. Moreover, five other analysts also rated DNN as a buy within the trailing half-year period.

Vizsla Silver (VZLA)

Headquartered in Vancouver, British Columbia, Vizsla Silver (NYSEAMERICAN:VZLA) focuses on silver and gold projects in Sinaloa, Mexico. Certainly, precious metals-related penny stocks represent one of the riskiest ventures around. Conspicuously, VZLA’s trailing one-year performance of 30% below parity confirms how treacherous this arena is.

Nevertheless, VZLA did gain over 27% of equity value since the start of Jan. With banking sector fears dominating the latest headlines, the precious metals space woke up. Furthermore, despite the poor reputation that penny stocks carry, Vizsla itself features no debt. That gives the company incredible flexibility to manage whatever turmoil comes next. Still, the other fiscal stats – such as negative free cash flow (FCF) growth rate – presents serious questions.

In closing, two Wall Street analysts peg VZLA as a buy. Their average price target comes out to $2.74, implying nearly 84% upside potential. And within the past one year, VZLA enjoys a unanimous buying rating among four analysts.

Valens Semiconductor (VLN)

Based in Israel, Valens Semiconductor (NYSE:VLN) is a fabless manufacturing company providing semiconductors for the automotive and audio-video industries. Specifically, Valens provides semiconductor products for the distribution of uncompressed ultra-high-definition multimedia content and in-vehicle connectivity applications. Despite its relevance, it’s off to a poor start this year, dropping 21% of equity value.

What’s worse, in the past 365 days, VLN stumbled nearly 47%. However, on paper, VLN ranks among the penny stocks with a few positive attributes. Most notably, Valens commands a cash-rich balance sheet. Furthermore, its equity-to-asset ratio stands at 0.86 times, outpacing 87.17% of the semiconductor industry. Also, its Altman Z-Score comes in at a healthy 7.33. For those that want to take a bet, the market prices VLN at 2.06-times tangible book. In contrast, the sector median is 2.6 times.

Turning to Wall Street, analysts peg VLN as a unanimous strong buy. Their average price target stands at $7.50, implying almost 116% upside potential.

Largo (LGO)

Based in Canada, Largo (NASDAQ:LGO) aims to be a global leader in the vanadium sector, providing products, materials and solutions for a low-carbon future, according to its website. Fundamentally, Largo should benefit from the burgeoning battery market along with the energy storage industry. However, it’s off to a rough start to 2023, giving up nearly 13% of its equity value.

Not only that, in the past 365 days, LGO gave up over 64% of equity value. Nevertheless, it could be one of the penny stocks to buy for those who look at circumstances as glasses half-full. For instance, the company features a three-year revenue growth rate of 23.2%, outpacing nearly 83% of the metals and mining industry. Also, its EBITDA growth rate during the same period is 50.8%, above over 90% of the sector.

Plus, LGO trades at 1.14 times book value. This ranks below the sector median of 1.54 times. Enticingly, covering analysts peg LGO as a unanimous strong buy. Their average price target stands at $11.76, implying over 148% upside potential.

VAALCO Energy (EGY)

Headquartered in Houston, Texas, VAALCO Energy (NYSE:EGY) specializes in hydrocarbon exploration. Theoretically, given the aforementioned geopolitical dynamics, VAALCO should rank among the most relevant penny stocks. Over time, it very well could be. However, in the meantime, EGY needs to focus on getting substantive traction. Since the Jan. opener, shares lost a bit more than 1%.

Moreover, in the trailing year, EGY plunged 40%. Still, if you’re the speculative type, VAALCO could be worth your patience. Conspicuously, Vaalco represents an operational machine, with a three-year revenue growth rate of 24.7%. Also, its operating margin stands out at a whopping 48.58%. Plus, its net margin isn’t too shabby either at 19%. Also, keep in mind that VAALCO owns a cash-rich balance sheet. As well, its Altman Z-Score comes out to 3.61, which reflects decent fiscal stability.

Stifel Nicolaus stuck its neck out with a buy rating. In addition, it sees EGY hitting $10.71, implying 155% growth potential.

DBV Technologies (DBVT)

Based in France, DBV Technologies (NASDAQ:DBVT) represents a biopharmaceutical firm. Per its public profile, DBV is known for developing “Viaskin” technology for administering allergens or antigens to intact skin while avoiding any transfer to the blood. Naturally, its scientific relevancies should excite investors of penny stocks. Sure enough, DBVT jumped over 7% since the start of the year.

However, during the trailing one-year period, DBVT gained less than a percent. That’s got to be frustrating for longtime stakeholders. Still, for astute speculators, DBVT could be intriguing. Notably, the underlying company commands a strong balance sheet. Its cash-to-debt ratio comes out to 20.87 times, above 60.57% of the biotech space. Also, its three-year EBITDA growth rate pings at 37.1%, rising above nearly 83% of the sector. Plus, its FCF growth rate during the same period distinguishes itself at 43.1%. Lastly, covering analysts peg DBVT as consensus moderate buy. Their average price target stands at $7, implying nearly 335% 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.