Undervalued penny stocks have an allure for investors for the simple reason that a little bit goes a long way. Specifically, a small investment that produces a little gain can be very rewarding for investors. But the potential reward comes with outsized risk. These are companies with small market caps that can be easy for investors to manipulate.
But how do you find penny stocks that fit this criteria? With many penny stocks, defining valuation can be tricky. Many of these companies are not yet profitable. And some are generating little revenue.
In this article, I’m looking at seven penny stocks that have the potential to pay off for investors down the road. Let me be clear. I’m not suggesting that any of these stocks will deliver quick, short-term profits. However, if you have a long-term outlook and are comfortable with throwing a few of your investing darts at some undervalued penny stocks, these may be intriguing choices.
Guardion Health Sciences
Seanergy Maritime Holdings
Diabetes remains one of the most prevalent chronic health conditions that individuals need to manage. And Senseonics (NYSE:SENS) has a product, Eversense, that is an implanted glucose monitor for diabetics. As Dana Blakenhorn wrote in December 2021, Senseonics has “a real product with serious potential.”
That makes the company intriguing to me. It’s focusing on one thing and trying to do that one thing really well. On the other hand, the market for implanted glucose monitoring is already getting crowded. Senseonics is competing against names like Dexcom (NASDAQ:DXCM) and Abbott Laboratories (NYSE:ABT) today. And down the road, Apple (NASDAQ:AAPL) may be entering the fray.
Senseonics is not yet profitable. And while it is projecting strong revenue growth over the next five years, it is still unlikely to be profitable. However, with a stock that’s currently trading slightly above $1, a little bit of growth can go a long way.
In a world where consumers are already showing signs of looking past streaming to the next new thing, Cinedigm (NASDAQ:CIDM) may be offering just that. That’s a big promise, but here’s what I mean. One of the benefits of streaming early on was that consumers could find the content they wanted to watch as opposed to paying for 300 channels and only using 30. However, as streaming companies have reached scale, they’ve essentially become like traditional cable. There’s a lot of content, but maybe not that much that you really want to watch.
Cindegim is a niche streaming service. It produces some original content, but it’s main objective is to deliver tightly focused content to a niche audience. It’s an intriguing and unproven strategy. And the company is also potentially moving into the NFT market, which puts the metaverse in play.
Revenue is increasing, the company is starting to show a small profit and institutional buying, while still small, is steady.
Romeo Power (RMO)
Electric vehicle stocks were battered in the latter half of 2021 when investors realized that the payoff is years away. However, that means that there are a number of undervalued penny stocks that offer a tremendous amount of potential. In my opinion, one of these is Romeo Power (NYSE:RMO).
Like many companies on this list, Romeo Power is developing a niche offering. In this case, it’s an innovative electric battery design for Class 1 to Class 8 commercial trucks. The battery offers 25% energy density and the ability to hold optimal temperatures in extreme climates. And the company has already landed PACCAR (NASDAQ:PCAR) as a high profile client.
However, RMO stock has been falling due to concerns about the availability of lithium. China controls much of the world’s lithium supply so the economic conditions in the country are not something investors should ignore. Some investors may also be souring on the company since it went public via a special purpose acquisition company (SPAC).
Sticking with the EV theme brings us to the next of our potentially undervalued penny stocks, Ideanomics (NASDAQ:IDEX). I’ll admit to being a little concerned about the company’s positioning in the fintech and EV spaces. The company uses artificial intelligence (AI) in a mobility segment aimed at providing electrification solutions for commercial vehicles. The company also offers fintech solutions.
It seems that the company is trying to plant its flag in a myriad of sectors, all of which are in the EV space. It seems unfocused to me, and the company does have a lot of debt. Plus, short interest, while coming down, remains uncomfortably high. Particularly when it would take over 11 days to cover a short position.
However, it’s hard to argue with the numbers. The company isn’t profitable and won’t be anytime soon. But it is growing its revenue at an impressive clip. And IDEX stock still holds at least moderate interest from institutional investors.
Guardion Health Sciences (GHSI)
Guardion Health Sciences (NASDAQ:GHSI) is a play on the medical foods market. The company offers science-based, clinically developed products that are designed to support the health needs of consumers, healthcare professionals and providers and their patients. Revenue has been increasing at a rapid pace, but the company is years away from profitability.
One of the company’s business units manufactures and distributes medical foods for ocular health with an emphasis on macular degeneration. This is the leading cause of vision loss in the United States. The addressable audience is expected to nearly double from 11 million to 22 million by 2050.
The company recently announced an agreement with OmegaQuant Laboratories in which the latter will provide analytic testing and laboratory support services for current and future products. That may be enough to move the needle on a stock that is trading at an all-time low.
Seanergy Maritime Holdings Corp. (SHIP)
One reason to consider Seanergy Maritime Holdings Corp. (NASDAQ:SHIP) is that at a time when many stocks are trading at a sizable loss, SHIP stock is up 19% for the year. And a significant portion of that growth has come in May, which was an unkind month for nearly every other stock.
That’s impressive growth for a dry bulk shipping company. And it’s not reasonable for investors to believe that it will continue to generate that kind of growth. However, the shipping industry will continue to grow as the world continues to untangle our very intertwined supply chains. That’s a reason that investors can believe the company’s market will meet forecasts for a compound annual growth rate (CAGR) of 4% for the remainder of the decade.
McEwen Mining (MUX)
The last of the undervalued penny stocks in this article is McEwen Mining (NYSE:MUX). Mining stocks, are notoriously cyclical. And they’re also sensitive to interest rate swings because a stronger dollar tends to cause a flow away from precious metals.
This time may be different, or not. There’s some belief that the Federal Reserve will be unable to raise interest rates as aggressively as they would like. That would be potentially bullish for mining stocks. And MUX stock gives speculative investors a low cost alternative that could have a big payoff.
Plus, as Josh Enomoto wrote in January, the company is also engaged in copper mining, which will continue to show strong demand in the EV sector.
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.
On the date of publication, Chris Markoch 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.
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