With the penny stock space being overcrowded, it’s not easy to spot multibagger penny stocks. Further, it needs some research to differentiate between purely speculative penny stocks and fundamentally strong penny stocks.
Purely speculative stocks are good for short term trades. If the timing is right, these stocks can double in a matter of few months. On the other hand, fundamentally strong penny stocks are worth considering for long term investing.
Of course, the risk is significantly higher as compared to blue-chip or quality growth stocks. However, a small part of the portfolio can be allocated to penny stocks that represents companies with a good business.
The focus of this column is on multibagger penny stocks with an investment horizon of three to five years. During this period, I would expect at least 5x returns from these ideas. However, it would not be surprising if some of the stories discussed deliver 10x or 20x returns.
Let’s discuss the business factors to be bullish on these penny stocks.
Aker Carbon Capture ASA (AKCCF)
Aker Carbon Capture (OTCMKTS:AKCCF) stock has been under-the-radar primarily because it trades in the OTC exchange. However, it’s a matter of time before the stock is in focus considering the attractive industry and the growth prospects.
As an overview, Aker Carbon is a provider of products, technology, and solutions in the field of carbon capture. A key point to note is that the Company’s technology is proven with seven carbon capture units being delivered and 60,000 operating hours.
It’s also worth noting that Aker Carbon ended Q4 2023 with an order backlog of 2.6 billion Norwegian krone. Further, the Company is targeting to capture 10 million tons of CO2 per annum by 2025. It’s therefore likely that revenue growth will be robust in the coming years.
Besides presence in Europe, the Company has signed a memorandum of understanding with Man Energy in the United States. The U.S. market is expected to reach volumes of 200 million tons of carbon capture by 2030. With a big addressable market, stellar revenue growth is likely through the decade.
Yatra Online (YTRA)
Being a micro-cap, Yatra Online (NASDAQ:YTRA) stock has been ignored. However, in my view, YTRA stock can deliver multibagger returns in the next five years. The Company is focused on the tourism market in India, which is likely to be significant.
It’s estimated that by the end of the decade, Indian travellers will spend $410 billion. This will position the country as the fourth largest spender on travel and tourism. Yatra Online, being among the leading players in the online booking industry, is well positioned to benefit.
Specific to Yatra, strong presence in the corporate travel sector is a differentiating factor. The Company has over 800 corporate customers with an addressable employee base of seven million. At the same time, Yatra is increasing focus on business-to-consumer segment growth.
For Q3 2024, Yatra reported revenue and adjusted EBITDA growth of 23% and 24% respectively. As the post pandemic travel market continues to gain traction, I expect revenue to accelerate coupled with margin expansion.
Blade Air Mobility (BLDE)
Blade Air Mobility (NASDAQ:BLDE) is a provider of air transportation alternatives to congested ground routes in the United States. The business model is unique and asset-light. Further, with diversification, I am bullish on healthy growth and massive value creation in the coming years.
It’s worth noting that Blade has presence in Northeast United States, Southern Europe, and Western Canada. There is ample headroom for regional expansion in the U.S. and Europe. This is one reason to be bullish from a revenue growth perspective.
The second important point is diversification. The Company has emerged as the largest dedicated air transporter of human organs for transplant in the United States. The relatively new business accounted for 56% of 2023 revenue. As the Company expands into other regions, it’s likely that the segment will emerge as a game-changer.
From a financial perspective, Balde reported adjusted EBITDA loss of $27.5 million in 2022. For the current year, the Company expects positive adjusted EBITDA. With healthy growth and operating leverage, it’s likely that margin expansion will sustain in the next few years.
Standard Lithium (SLI)
Standard Lithium (NYSE:SLI) stock has plummeted by 72% in the last 12 months. The key reason for the sharp correction is downside in lithium prices. With the stock being ignored, it’s a good time to consider exposure. I believe that SLI stock can be a potential 10x or 20x story if lithium trends higher in the next few years.
The key point to note with mining stocks is that even as the market valuation plunges, the assets are in place. It’s a different story if investors expect lithium to remain depressed for an extended period. However, that’s unlikely with analysts talking about lithium shortage coming as early as 2025.
Coming to the asset potential, the Company’s Lanxess asset has an after-tax net present value of $722 million. Further, the South West Arkansas has an after-tax NPV of $4.5 billion. In comparison, the Company currently has a market capitalization of $195 million. Clearly, SLI stock is massively undervalued and is a potential multibagger.
Tullow Oil (TUWLF)
Tullow Oil (OTCMKTS:TUWLF) is an oil and gas exploration company with primary focus on Africa. With oil gradually trending higher, it’s a good time to consider exposure to the stock.
I am positive on oil considering two factors. First, geopolitical tensions in the Middle-East have translated into a premium for oil price. Further, with impending rate cuts, it’s likely that oil and industrial commodities will trend higher.
As an overview, Tullow Oil has 900mmboe of 2P reserves and 2C resources. The Company continues to explore opportunities in West and East Africa, which is home to more than 30 billion barrels of oil.
It’s also worth noting that Tullow has guided for $800 million in free cash flow over the period 2023 to 2025. Besides aggressive exploration activity, healthy cash flows will provide headroom for deleveraging. Once credit metrics improve, Tullow will be positioned to initiate dividends considering the healthy free cash flow outlook. This will translate into stock re-rating.
Wallbox N.V. (WBX)
The broad EV industry has been depressed in the last few quarters. Factors like macroeconomic headwinds and intense competition have impacted sentiments. I believe that it’s a good time to consider exposure to quality EV stocks. Among the electric vehicle charging stocks, Wallbox (NYSE:WBX) is a potential multibagger. After a correction of 63% in the last 12 months, WBX stock seems poised for a strong reversal.
For Q4 2023, Wallbox reported healthy revenue growth of 33% on a year-on-year basis to $43.3 million. Further, the Company’s adjusted EBITDA witnessed an improvement of 54% on a year-on-year basis. In my view, robust revenue growth is likely to sustain coupled with improvement in EBITDA margin.
In Q4 2023, Wallbox acquired ABL, a leading EV charging company in Germany. Further, the Company has introduced several new products that include Pulsar Pro, Supernova 150, and Supernova 180. These are the key factors that are likely to support accelerated growth.
With the acquisition of ABL, the Company added 143 million euros of cash. This provides flexibility for aggressive investments. With the Company expecting 2024 to be “a year of growth and profitability,” I am positive on WBX stock surging higher from oversold levels.
Bitfarms (BITF)
Bitcoin (BTC-USD) has corrected in the recent past and trades at $61,000. I see this as a good opportunity to buy quality Bitcoin miners. With halving due this month, I am bullish on renewed upside for the digital asset. Later this year, potential rate cuts will be another upside catalyst for Bitcoin.
Bitfarms (NASDAQ:BITF) is a quality miner to consider with strong fundamentals. BITF stock had surged to highs of $3.9 earlier this year.
However, there has been a sharp correction and the stock trades at $1.8. The correction has primarily been due to a $375 million at-the-market equity offering in March. With big expansion plans, I expect a bigger rally for BITF stock. Current levels are therefore attractive for fresh exposure.
In terms of expansion, Bitfarms reports hash rate capacity of 6.5EH/s at the end of 2023. The Company is targeting to increase capacity to 21EH/s by the end of the year. With Bitcoin in an uptrend, I expect robust growth in revenue, EBITDA, and cash flows.
On the date of publication, Faisal Humayun 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.