7 Cheap Penny Stocks to Buy Before They Boom
Regardless of economic cycles, investing in cheap penny stocks is always a good idea. After all, some of the blue-chip stocks we love today started off as penny stocks, making their early investors tremendous amounts of money.
Traditionally, penny stocks are defined as equities that trade for $5 or less. On the other hand, the SEC suggests that penny stocks are securities which have market capitalizations of less than $300 million.
During the current bear market, plenty of names have dropped to penny-stock status. However, this article focuses on bona fide, cheap penny stocks that are yet to make it into the “big time.”
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For the most part, penny stocks are considered speculative, high-risk, high-reward opportunities.
Here are seven penny stocks that you should consider adding to your portfolios now.
Destination XL Group | $4.27 | |
Transocean | $3.67 | |
Tilray | $3.74 | |
Uphealth | 53 cents | |
Lake Resources | 85 cents | |
Liberty Trip Advisor Holdings | $1.25 | |
Esports Entertainment | 50 cents |
Destination XL Group (DXLG)
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Destination XL Group (NASDAQ:DXLG) is one of the top plus-size clothing brands for men. Similar to other players in the niche, the company faced major challenges during the pandemic. But with the positive catalyst of the re-opening in play, DXLG has bounced back remarkably well.
In fiscal 2021, its revenue jumped 33.4% to $133.5 million. Moreover, it attributed the healthy growth to a 41.5% bump in its comparable sales. Finally, its net income came in at an incredible $56.7 million, representing its highest level in the past five years.
If Destination can continue expanding its online presence and open more stores, its sales will probably continue to increase. Moreover, Allied Market Research suggests that the global plus-size market could have a compound annual growth rate of 5.9% from 2021 to 2027, foreshadowing strong growth for DXLG.
Transocean (RIG)
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Transocean (NYSE:RIG) “provides offshore contract drilling services for oil and gas wells,” and it has a proven track record of securing long-term contracts at attractive rates. Moreover, the outlook of the energy sector is improving, boding well for RIG stock. Meanwhile, RIG has bolstered its liquidity position through equity offerings and a revolving credit facility.
Transocean’s second-quarter results were heartening, as its revenue efficiency came in at a healthy 97.8%, almost 3% higher than during the same period a year earlier Moreover, it secured a massive $915 million contract for its Petrobras 10000 drillship from a Brazilian oil company.
Also, Deepwater Conqueror, another one of RIG’s top drill ships, was awarded a massive, two-year contract at an incredible recovery day rate. Transocean’s aggregate backlogs amount to $1.24 billion, while its high liquidity balances will enable the company to afford its lofty capital-expenditure requirements.
Tilray Brands (TLRY)
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Canadian cannabis giant Tilray Brands (NASDAQ:TLRY) is arguably the largest cannabis producer in terms of revenue. It faces intense competition in Canada, and that competition has caused its revenues to drop sharply over the years. However, it is clear that the company is looking to prioritize its overseas growth further and grow through acquisitions.
In July, Tilray bought a 50% stake in another top Canadian cannabis company, Hexo (NASDAQ:HEXO), which has a massive presence in the U.S. and Europe. The deal could potentially reduce Tilray’s costs by $80 million.
In a separate deal, it bought Manitoba Harvest to distribute CBD on the U.S. front. Additionally, Tilray’s acquisition of SweetWater’s brewing assets is likely to be a healthy source of gross margins.
Tilray’s recent top-line growth comes from its expansion in Germany, where it outsells the competition. Looking ahead, it expects to generate a whopping $4 billion of sales by 2024, while it trades at a price that underestimates its long-term outlook.
UpHealth (UPH)
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UpHealth (NYSE:UPH) is a virtual healthcare solutions provider that benefitted immensely from the surge of the telehealth sector during the pandemic. However, with the pandemic fading, its shares have taken a beating and have now bottomed. Meanwhile, the market seems to have written off the potential of its services, which are likely to thrive beyond the pandemic.
By effectively mixing virtual systems and facilities, UpHealth exploits a myriad of cross-selling opportunities. Also, it offers advanced, AI-based analytics services that improve patients’ outcomes and increase the quality of its products.
UPH operates a scalable platform that’s generating gross margins of close to 40%. In Q2, the company’s top line climbed 37% YOY to $43.7 million. Given the easing of the pandemic, it reported incredible results.
What’s more, UPH stock trades at just 0.44 times analysts’ average forward sales estimate, representing a significantly better entry point than when it reached its highs last year.
Lake Resources (LLKKF)
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Australian firm Lake Resources (OTCMKTS:LLKKF) is a pre-revenue business that specializes in lithium extraction. It owns five lithium mining sites in Argentina.
Lake’s flagship Kachi site effectively covers an area of 170,000 acres and is now fully funded through contracts to sell its lithium in the future. Its projects’ biggest selling point is the 99.9% purity level of their lithium. Additionally, Lake has a relatively small environmental footprint, and its processing speed is faster than that of many other miners.
As a result of these points, its Kachi mine is well-positioned to reach the commercialization stage, and Kachi’s commercialization could enable the company to get its other mines under way relatively quickly. Although Lake is a speculative play, it has moon-shot potential for long-term investors.
Liberty Tripadvisor Holdings (LTRPA)
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Liberty Tripadvisor Holdings (NASDAQ:LTRPA) is a holding company whose primary asset is Tripadvisor, which is touted as one of the largest travel platforms worldwide.
Because of the drop in travel during the pandemic, Tripadvisor’s business was down significantly. However, with the tourism sector rapidly recovering, the company was able to post staggering results for the first half of the year. And encouragingly for LTRPA stock, the pent-up demand for travel remains high despite the current macroeconomic challenges.
In Q2, the company’s revenue soared over 77% to $417 million. Moreover, it posted earnings per share of 88 cents per share. As time goes on, the travel platform’s experiences and dining divisions are likely to benefit immensely from the revival of tourism. Research suggests that the market for online travel should grow at an amazing compound annual growth rate of 14.8% from 2022 to 2031.
Esports Entertainment (GMBL)
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Esports Entertainment (NASDAQ:GMBL) markets itself as an esports and online gambling business. It utilizes a multi-pronged approach, effectively leveraging its esports expertise to facilitate its wagering business. Its wagers are accepted in over 149 jurisdictions, which should probably increase over time in line with the growth of the sector.
Esports is a fast-growing business that presents excellent long-term opportunities for multiple companies. Some very large corporations have entered the esports sector. Esports wagering can boost the gambling sector’s growth in the long term.
GMBL seems to be riding the non-cyclical growth of esports effectively and continues to post spectacular growth numbers every quarter, making GMBL stock an interesting, long-term bet.
On the date of publication, Muslim Farooque 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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
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