While some financial advisors may recommend a small portion of their clients’ portfolios to be directed toward higher-risk ventures, hardly any will suggest speculative penny stocks. Suffering from technical issues such as low volume and extremely high volatility, this segment of the capital markets won’t be for everyone. However, those that know exactly what they’re doing may venture cautiously into this arena.
Believe me, I’m emphasizing the word cautiously. Under no circumstances should you invest heavily in penny stocks. Heck, it’s probably a better bet to buy Rolex watches than to engage this sector with money you can’t afford to lose. Because more often than not, you will lose. That’s the reality of this wild segment.
Still, I want to give you the best probabilities of success, even with this tightrope of a market. So, each of these ideas features significant upside potential as determined by Wall Street analysts. At the low end, you may receive a profit of 42%. On the upper end, more than 260%. If that’s got you curious, below are the penny stocks to cautiously consider.
|OSS||One Stop Systems||$2.75|
|SWAG||Stran & Company||$1.82|
A custom apparel manufacturer for global brands, Jerash (NASDAQ:JRSH) may be risky but it’s also intriguing. By serving various renowned brands, Jerash benefits from a massive consumer footprint. To be fair, JRSH gave up nearly 30% of equity value in the trailing year. However, since the Jan. opener, shares gained almost 25%.
Drilling into the fiscal details, prospective speculators of penny stocks will like what they see. Primarily, Jerash commands a strong balance sheet. In particular, its cash-to-debt ratio stands at 4.5%, which ranks above 81.48% of the industry. Also, its Altman Z-Score is 5.02, reflecting low bankruptcy risk.
Operationally, Jerash features a three-year revenue growth rate of 17.1%, outpacing nearly 89% of sector rivals. Also, its book growth rate during the same period pings at 8.4%, which hits well above average for the industry.
Finally, D.A. Davidson’s Michael Baker rates JRSH as a buy, forecasting a $7 price target. If JRSH gets there, it would imply over 42% upside potential. Thus, it makes for a quite balanced example of penny stocks to buy.
Headquartered in Wilmington, Delaware, Onfolio (NASDAQ:ONFO) buys digital companies from independent entrepreneurs and grows them to their full potential, according to its website. Since the start of the new year, ONFO performed reasonably well, gaining over 9% of equity value. However, in the past 365 days, it cratered 27%. Still, this could be one of the underappreciated penny stocks to consider.
To be sure, the volatility that Onfolio incurred isn’t without justification. In particular, the company only generates a small amount of revenue. For instance, on a trailing-12-month basis, the enterprise rang up a measly $1.53 million. In contrast, the net loss during the same period amount to nearly $4 million.
Despite the obvious headwind, a major positive centers on its balance sheet. Specifically, its cash-to-debt ratio stands at nearly 375 times. This metric ranks better than almost 76% of sector peers. With borrowing costs likely to increase in the months ahead, having a strong cash balance will command a significant premium.
Enticingly, EF Hutton’s Michael Albanese views ONFO as a buy, placing a $3 price target. If shares hit that estimate, we’re looking at upside potential of over 71%.
One Stop Systems (OSS)
Based in Escondido, California, One Stop Systems (NASDAQ:OSS) designs and manufactures innovative edge computing modules and systems for artificial intelligence-enabled transportable applications. These include ruggedized servers, compute accelerators and expansion systems, among others. Although an attractive framework, OSS struggles in the charts.
Since the Jan. opener, OSS dipped 5%. In the trailing year, it dropped 28% of equity value. For full transparency, Gurufocus.com warned its readers that One Stop may be a possible value trap. Objectively, the market prices OSS at a trailing sales multiple of 0.81. As a discount to revenue, One Stop ranks better than nearly 65% of the competition.
Surprisingly, though, the company enjoys a strong balance sheet. Its cash-to-debt ratio stands at nearly 3 times, above almost 66% of the industry. As well, its Altman Z-Score is 4.54, reflecting low bankruptcy risk. Thus, it’s not one of your typical penny stocks.
Turning to Wall Street, analysts peg OSS as a consensus moderate buy. Their average price target stands at $6.50, implying over 126% upside potential.
Research Solutions (RSSS)
Calling Henderson, Nevada home, Research Solutions (NASDAQ:RSSS) bills itself as a pioneer in providing seamless access to scientific content. Specifically, the company helps scientists and knowledge workers discover, access, manage and author scientific publications faster with better results. And it’s brought good results to the market as well.
Since the start of the new year, RSSS gained over 13% of equity value. In the trailing 365 days, shares moved up over 1%. While not the most impressive outing, RSSS performed much better the benchmark S&P 500, which lost almost 7% during the same period.
As with other surprising names among penny stocks, Research Solutions benefits from a strong balance sheet. Here, you can forget about cash-to-debt ratios because it has no debt. This status should extend Research incredible flexibility as we encounter a possibly soft economy.
Lastly, Maxim Group’s Allen Klee views RSSS as a reiterated buy, targeting $5 a share. If Research gets there, stakeholders will enjoy upside of almost 133%.
MamaMancini’s Holdings (MMMB)
Hailing from New Jersey, MamaMancini’s Holdings (NASDAQ:MMMB) is a food company. As you might guess from the brand name, MamaMancini’s specializes in home style, old-world Italian food. Typically, you can’t go wrong with Italian cuisines (these folks know how to cook!). However, MMMB just hasn’t resonated with the audience this year, shedding almost 8% since the Jan. opener.
Indeed, the volatility isn’t without some justification. For instance, Gurufocus.com warns that MamaMancini’s may be a possible value trap. However, the company’s also not without its merits. A prime example focuses on its three-year revenue growth rate. At 14.6%, this metric outpaces 78.37% of sector peers.
Also, it’s worth noting that the market prices MMMB at a forward multiple of 12.19. As a discount to earnings, MamaMancini’s ranks better than nearly 72% of the industry. Last month, Lake Street’s Ryan Meyers issued a buy rating for MMMB, placing a $4 price target. From here to there, we’re talking upside potential of 134%.
Stran & Company (SWAG)
Based in Massachusetts, Stran & Company (NASDAQ:SWAG) states that it drives brand awareness and behavioral changes through visual, creative and technology solutions. Underneath this word salad, Stran appears to specialize in promotional products and branded merchandise. On paper, you might expect SWAG to be one of the penny stocks to struggle based on consumer economy challenges. So far this year, though, it’s done exceptionally well.
Since the Jan. opener, SWAG gained nearly 33% of equity value. In the past 365 days, it moved up slightly over 21%. Now, when you extend out the chart – say to five years – the red ink starts to show (and badly). Unfortunately, its negative net margin on a trailing-year basis makes SWAG one of the riskiest penny stocks to consider.
However, it does enjoy some tangible positives in the balance sheet. In particular, the company’s cash-to-debt ratio stands at 21.4 times. This metric ranks above 78.42% of sector competitors. Even better, EF Hutton’s Edward Reilly pegs SWAG as a buy, placing a $4.50 price target on it. Should SWAG get there, it will deliver a nearly 153% return.
IceCure Medical (ICCM)
If you really want to throw caution to the wind regarding penny stocks, IceCure Medical (NASDAQ:ICCM) might be your ticket. A biotechnology firm, IceCure specializes in an innovative oncological methodology called cryotherapy. Its corporate tagline is “Freeze Cancer, Not Your Life.”
Unfortunately, IceCure hasn’t quite resonated with the target investor audience. Since the start of this year, ICCM plunged almost 16%. And in the past 365 days, it gave up nearly 51% of equity value. Financially, it’s a bit of a mixed bag. Similar to other aspirational biotechs, IceCure suffers from deeply negative profit margins.
However, it does enjoy a three-year revenue growth rate of 16.4%, outpacing nearly 71% of the competition. Also, its book growth rate during the same period is 41.7%, besting 82% of the field. Lastly, Wall Street analysts peg ICCM as a consensus moderate buy. Moreover, their average price target stands at $4.29. This estimate implies a staggering upside potential of almost 261%.
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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.