Many are under the illusion that penny stock investing is a risk-it-all phenomenon. However, I oppose such views because adding penny stocks to a diversified portfolio can lower risk while enhancing an investor’s reward. Nevertheless, there is truth in penny stocks being risky in isolation. Therefore, careful analysis is required before committing capital to penny stocks.
There’s much debate surrounding the classification of penny stocks. For the purpose of this article, I screened for stocks with market capitalizations below $250 million. In addition, I applied my qualitative knowledge of companies that I know are overlooked by market participants.
Without further ado, let’s traverse into a detailed discussion about three penny stocks with the potential to deliver fast gains.
Bragg Gaming Group (BRAG)
Bragg Gaming Group (NASDAQ:BRAG) functions as a business-to-business online gaming aggregator. The company’s key areas of expertise include iGaming and turnkey platform solutions. If you haven’t heard of BRAGG Gaming before, it’s most likely because its stock is thinly traded, with an average daily trading volume of merely 28,563.
It’s time to cash in on this overlooked stock, as its end market is solid, with a forecasted compound annual growth rate (CAGR) of 10.2% until 2030. Moreover, BRAGG could be set for a restructuring. One of its largest investors, Raper Capital, recently proposed a company sale to a larger competitor to unlock value. Significant long-term value could be garnered if such a deal had to occur on a stock-for-stock basis. Additionally, a sale will allow investors to benefit from a merger arbitrage surge.
As things stand, BRAGG Gaming Group possesses an enterprise value-to-sales ratio of 1.26x. Additionally, the stock recently broke through its 10-, 50-, 100-, and 200-day moving averages, suggesting a trend has emerged.
In essence, BRAGG stock is well-placed and ready to reach new heights.
Orion Group Holdings (ORN)
Orion Group Holdings (NYSE:ORN) is a specialized construction company offering onshore and on-water construction services. The company’s nimble approach, which includes a turnkey solution, is a key attraction. Moreover, Orion provides niche services, allowing vital value-additivity.
Orion suffered from industry-based headwinds in the past year as lower building permit applications and inconsistent construction spending influenced Orion’s core operations.
However, key variables suggest a change in momentum has occurred. A rise in year-to-date building permit demand combined with a recent earnings beat indicates just that. Orion released its fourth-quarter earnings results last month, revealing a revenue target beat of $10.29 million and an earnings per share beat of four cents. Moreover, the firm upgraded its guidance, citing an improved backlog and enhanced pipeline projects.
ORN stock is severely undervalued. For instance, it hosts a price-to-sales ratio of merely 0.3x. In addition, ORN stock’s Put/Call ratio of 0.07x is astonishingly low and indicates significant optimism.
Although a risky stock to own, ORN stock’s key variables suggest exponential returns are in store!
SurgePays (SURG)
SurgePays (NASDAQ:SURG) is a Deloitte Fast 500 company. The firm operates in the fintech space with adjacent telecommunications and cloud software businesses. SurgePays dials in on underbanked and underserved areas in the United States. Targeting underserved regions aligns with a modern business model of maximizing yield by being early-to-market.
SURG stock has increased by more than 30% year-over-year, with key indicators suggesting additional gains are en route. What am I basing my claim on? Firstly, the company’s corporate strategy is sound, especially regarding capital allocation and business development. For example, SurgePay recently acquired ClearLine to enhance its front-end exposure and enhance vertical integration. Furthermore, SurgePay announced an agreement with SIN PIN to extend its telecommunications offerings to immigrant communities, therefore further extending its reach into high-yielding end markets.
SURG stock is severely undervalued. As per recent data, SURG has a price-to-sales ratio of 0.75x and an enterprise value-to-sales ratio of 0.88x. These data points are supplemented with a 56.19% five-year CAGR.
We are looking at a bargain here.
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, Steve Booyens did not hold (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.