10 Best Penny Stocks to Invest in 2023

Penny stocks allow you to target much higher gains than the market average. You’ll likely be investing in companies with a small market capitalization and limited liquidity – so the risks are much higher than other stock types.

In this guide, we analyze the 10 best penny stocks to buy in 2023. We also discuss the mechanics of penny stocks, how to identify suitable companies, and where to complete your purchase.

Best Penny Stocks to Buy Now in 2023

The best penny stocks to invest in right now are listed below:

  1. BioNano Genomics: BioNano Genomics is a micro-cap health stock valued at just $98 million. It specializes in DNA structure advancements, which can yield solutions to a range of existing health problems. BioNano Genomics is listed on the NASDAQ exchange and its shares trade for just $2.79. This represents a 90% discount from its 52-week high.
  2. Nine Entertainment: Nine Entertainment is an Australian media company with holdings in TV networks, radio broadcasting, newspapers, and digital streaming. It trades on the Australian Stock Exchange at just $1.98 per share. The stock is up 9% year-to-date and is currently offering a running dividend yield of 5.56%.
  3. Rolls-Royce: Rolls-Royce is a UK-based automaker that also develops power and defense systems for the aviation industry. This is one of the best-performing penny stocks, with Rolls-Royce up 197% over the prior year. While there is no dividend policy in place, Rolls-Royce offers an attractive upside potential. Its large market capitalization and established reputation offer stability to your penny stock portfolio.
  4. Torrid Holdings: Torrid Holdings is a US-based women’s apparel company with over 600 domestic stores. It was listed on the NYSE in 2021, so is a young growth stock with plenty of potential. Right now, Torrid Holdings has a market capitalization of $210 million and a competitive P/E ratio of 9.60 times. Over the prior month of trading, Torrid Holdings stock is up 44%.
  5. Centamin: Centamin is an established gold mining company with global operations. Listed on the London Stock Exchange, Centamin has a market capitalization of £936 million (about $764 million). It’s currently offering a running dividend yield of 4.38%, which will appeal to income investors who also want to target high growth. Centamin has a solid balance sheet with minimal debt.
  6. Hub Cyber Security: Over the prior five days of trading, Hub Cyber Security stock has increased by 214%. The firm specializes in cybersecurity services, which include compliance and confidential computing. Based in Israel, demand for cybersecurity services has seen a rapid increase, as per rising tensions in the region. Hub Cyber Security has a market capitalization of just $67 million.
  7. Parazero Technologies: Another Israel-based penny stock to watch is Parazero Technologies. This growth company specializes in commercial drone service and recently secured approval from the Australian government. Parazero Technologies stock is up 285% over the prior five days of trading. It has a micro-valuation of just $16.3 million.
  8. Camber Energy: Camber Energy is a US-based oil and natural gas exploration company. It has a small market capitalization of just $29 million and a 24-hour trading volume of $6.1 million. Over the prior five days, Camber Energy stock has increased by 52%. Its most recent quarterly report saw a sizable increase in revenue and a major reduction in operating expenses.
  9. Acurx Pharmaceuticals: Another healthcare penny stock to keep an eye on is Acurx Pharmaceuticals. This firm is developing new antibiotics to treat bacterial infections. It has a net positive balance sheet and its stock is up 73% in the prior 24 hours. Acurx Pharmaceuticals stock has increased by 171% in the past five days of trading.
  10. Phoenix Motor: Phoenix Motor specializes in electric vehicles for the commercial industry. It designs and manufactures EV shuttle buses and flatbed trucks. Phoenix Motor stock has increased by 73% over the prior five days of trading. Moreover, it has a market capitalization of just $33.6 million, so there’s plenty of room for long-term growth.

Note: Our criteria for the above penny stocks list is based on the SEC’s definition – meaning each company trades for under $5 per share.

A Closer Look at the Top Penny Stocks to Buy

You’ll need a solid methodology when choosing the best penny stocks to buy.

  • Factors to consider include the industry and sector, its current and potential stock price, market capitalization, and its financial health.
  • You’ll also need to research the firm’s fundamentals – such as revenue, income, and operating expenses.

Below, we take a much closer look at the top penny stocks to buy today.

1. BioNano Genomics – Micro-Cap Healthcare Stock Specializing in DNA Structures

BioNano Genomics is a US-based healthcare company that specializes in DNA processes. It has developed proprietary technology that helps understand DNA structures within human cells. Some of the niche areas BioNano Genomic is targeting include genetic diseases, cell bioprocessing, molecular genomics, and oncology.

BioNano Genomics is listed on the NASDAQ exchange and is currently valued at just under $99 million. This makes BioNano Genomics a micro-cap penny stock with plenty of upside potential. Currently, BioNano Genomics stock is trading at $2.79 per share. This is just a fraction of its 52-week high of $30.10.

Bionano Genomics stock

Like many penny stocks, BioNano Genomics witnesses significant volatility. Year-to-date, the stock is down 80%. In terms of its financials, BioNano Genomics reported a revenue increase of 29.87% in its latest earnings report. However, although net profit margins were up 6.82%, it still generated a $38.9 million loss. BioNano Genomics’ balance sheets should also be considered. Cash and short-term investments took a major hit during the quarter.

There was a 58.68% decline to $77.06 million. Moreover, total liabilities increased by 52.8% to $56.63 million. Ultimately, an investment in BioNano Genomic stock is reliant on its DNA advancements and treatment-specific solutions. Therefore, it’s wise to keep an eye on treatment developments and potential FDA filings.

2. Nine Entertainment – Australian Media Company With a Running Dividend Yield of 5.56%

Nine Entertainment is an Australia-based media company with subsidiary holdings in TV broadcasting, radio, and newspapers. Some of its subsidiaries include the Sydney Morning Herald, Nine Network, Pedestrian, and the Australian Financial Review. Nine Entertainment was listed on the Australian Stock Exchange in 2013.

It currently trades at $1.98 per share and is up 9% year-to-date. Over a five-year period, Nine Entertainment stock is up 7.88%. Unlike many penny stocks, Nine Entertainment is a medium-cap company – currently valued at $3.2 billion. What’s more, this is the best penny stock to buy for dividends.

Nine Entertainment stock

Nine Entertainment stock is currently offering a running dividend yield of 5.56%. In its most recent earnings calls, Nine Entertainment stock reported revenues of $646.88 million. This is down 4.67% year-over-year. Moreover, the firm made a quarterly loss, although this was minute at just $647,000.

Nine Entertainment is currently holding $119.6 million in cash and short-term investments. This is down 22% from the prior year. In the short term, investors will be looking to regain the stock’s 52-week high of $2.27. From current prices, this would require an upside of 14%.

3. Rolls-Royce – Top-Performing Penny Stock With 1-Year Gains of 197% 

While Rolls-Royce is best known for its luxury cars, it also specializes in defense and aerospace technologies. It designs and manufactures aviation power systems and safety mechanisms for the air, land, and sea. Rolls-Royce stock trades on the London Stock Exchange and is currently priced at just 205.28p. (about $2.51).

This is one of the best-performing penny stocks right now, with Rolls-Royce up 197% over the prior 12 months. Year-to-date, the stock is up 107%. Although Rolls-Royce stock has a large market capitalization of £17 billion (about $20.8 billion), there’s still plenty of upside to target.

Rolls-Royce stock

In the short term, a return to its 52-week high of 233p represents a solid target. This would require an upside of 13%. However, long-term investors will be looking to target the 300p that Rolls-Royce hit in 2018. Crucially, Rolls-Royce’s most recent earnings report yielded excellent results. For a start, Rolls-Royce increased revenue by 34.34% to £3.76 billion.

Net income saw a significant rise of 179.09% to £614.5 million. EBITDA also saw a notable increase of 82.43% to £472.5 million. Although Rolls-Royce saw a 4.95% increase in cash and short-term investments, total assets declined by 2.85%. That said, Rolls-Royce reduced its total liabilities by 5.87% to £34.71 billion.

4. Torrid Holdings – US-Based Women’s Clothing Company With 1-Month Growth of 44% 

Torrid Holdings is a US-based clothing company that specializes in women’s apparel. In addition to dresses, shoes, shorts, and hosiery, it also manufactures jewelry, accessories, and beauty products. Torrid Holdings has stores in over 600 locations across 35 US states.

Torrid Holdings stock was listed on the NYSE 2021, so is firmly in its growth stage. Currently, Torrid Holdings trades at $2.02 and is one of the best-performing penny stocks in recent weeks. Over the prior month of trading, Torrid Holdings stock is up 44%. However, over a one-year period, the stock is down 53%.

Torrid Holdings stock

Looking at its most recent earnings report, Torrid Holdings had a poor quarter. For example, revenues were down 18.21% to $289.14 million. Net income saw a significant drop – down 70.81% to $6.63 million. There was also a 72.73% decline in earnings per share, down to $0.06.

The balance sheet also took a hit, with cash and short-term investments down 19.32% to $18.54 million. In terms of valuation, Torrid Holdings has a market capitalization of just $210 million. Its P/E ratio of just 9.60 times is considered low when compared to the broader industry.

5. Centamin – Dividend-Paying Gold Mining Stock With a Solid Balance Sheet  

Centamin is an established gold mining company with global operations. One of its most profitable mines is based in Sukari, Egypt. This mine is estimated to have 6 MOZ worth of gold reserves – which translates to 14 years of further mining operations.

Centamin is listed on the London Stock Exchange and currently trades at just 81.15p (about $0.66). It has a market capitalization of just £936 million (about $764 million) and a P/E ratio of 14.9 times. This is a volatile penny stock, with Centamin down 29% year-to-date. That said, there’s a lot to like about Centamin.

Centamin stock

First, the mining company offers an attractive running dividend yield of 4.38%. Moreover, the firm’s most recent earnings report yielded some positive results. For instance, revenue saw a year-over-year increase of 11.48% to £212.8 million. Net income also saw an increase, rising 7.35% to £45.48 million.

Investors also saw an EBITDA increase of 24.76% to £93.60 million. Unlike many penny stocks, Centamin has a solid balance sheet. It currently has total assets of £1.51 billion and liabilities stand at just £131.06 million. Cash from operations saw a 33.49% increase year-over-year and free cash flow rose by 449.56%. Therefore, Centamin is well-positioned to continue its global mining exploration.

6. Hub Cyber Security – Cybersecurity Service Company With 5-Day Gains of  214%

Hub Cyber Security is an Israel-based cybersecurity company that trades on the NASDAQ. It specializes in confidential computing, managed services, and regulatory compliance. Due to the most recent Israel-Hamas conflict, demand for cybersecurity services is witnessing an unprecedented rise.

Hub Cyber Security is a direct beneficiary, as reflected in its recent stock price performance. For example, Hub Cyber Security stock has increased by 180% in the prior 24 hours of trade. Over a five-day period, the stock is up 214%. Currently, Hub Cyber Security stock trades at just $0.67.

Hub Cyber Security stock

With momentum on its side, investors will be looking at its 52-week high of $3.10. This would require a further upside of almost 350% from current prices. Hub Cyber Security has a market capitalization of $67 million – so expect lots of volatility in the coming days. In terms of its financials, Hub Cyber Security saw a 30.25% increase in revenues over the prior quarter.

That said, the firm still made a quarterly loss of $30.08 million. The balance sheet is also concerning, with cash and short-term investments currently at just $3.99 million. This represents a 71.42% decline year-over-year. Moreover, total liabilities saw a 20.07% increase to $65.98 million.

7. Parazero Technologies – Commercial Flight Drone Services With 5-Day Stock Growth of 285%  

Parazero Technologies is an Israel-based drone company that specializes in commercial flights. It utilizes real-time data analytics to increase flight safety in populated areas, allowing Parazero Technologies to facilitate deliveries in major cities. Parazero Technologies recently secured approval from the Australian government for its services.

This has resulted in significant interest in its stock. In fact, over the prior 24 hours of trading, Parazero Technologies stock has increased by 132%. Over the prior five days of trading, the stock is up over 285%. Although Parazero Technologies is headquartered in Israel, its stock is listed on the NASDAQ.

Parazero Technologies stock

This is a micro-cap penny stock, with Parazero Technologies currently valued at just $16.3 million. The stock currently trades at $2.70 per share. Parazero Technologies has a 52-week high of $4.15 and based on its current trajectory, this could be regained in the coming days.

Its most recent earnings call reported a 137.66% increase in revenue. Net income rose by 54.31%, but this still yielded a loss of just over $216,000. Like many micro-cap penny stocks, Parazero Technologies has a fragile balance sheet. It holds just over $172,000 in cash and short-term investments. Based on current liabilities, it has a total equity of negative $1.97 million. As such, the firm will likely need to source additional funding in the near future.

8. Camber Energy – Strong Momentum Penny Stock With 5-Day Gains of 52%   

Camber Energy is one of the best penny stocks to buy for growth momentum. This is a US-based mining company with operations in crude oil and natural gas exploration. Over the prior five days of trading, Camber Energy stock has increased by 52%. It trades at $0.33 per share and is listed on the NYSE American.

With a market capitalization of just $29 million, there’s plenty of upside to target – especially with global energy prices remaining high. Moreover, trading volumes on Camber Energy stock are considered high at $6.1 million, This ensures that there’s enough liquidity to enter and exit positions efficiently.

Camber Energy stock

We also like the look of Camber Energy’s most recent earnings call. The firm reported a 22.37% increase in revenues, up to $7.24 million. Even more impressively, Camber Energy reduced its operating expenses by 45.88% to $3.31 million.

Although net income increased by 52.72% year-over-year, Camber Energy made a quarterly loss of $1.55 million. The firm has a net positive balance sheet, with total assets and liabilities standing at $49.49 million and $25.7 million respectively. The main drawback of Camber Energy stock is that, unlike most oil and gas companies, it doesn’t pay a dividend.

9. Acurx Pharmaceuticals – Robust Balance Sheet Covering Debt Levels 3 Times Over    

Acurx Pharmaceuticals is a healthcare company that develops new antibiotic treatments. The firm specifically targets bacterial DNA, preventing it from growing and causing infections. Acurx Pharmaceuticals is also one of the best penny stocks to buy for upside momentum. Listed on the NASDAQ, the stock is up nearly 73% in the prior 24 hours of trading.

Acurx Pharmaceuticals stock has increased by 171% over a five-day period. Currently priced at $3.32 per share, the firm has a small market capitalization of just $43.1 million. However, average 24-hour trading volumes are low at just over $421,000. This means increased volatility and potential issues when exiting a position.

Acurx Pharmaceuticals stock

Nonetheless, Acurx Pharmaceuticals has a solid balance sheet. It currently holds $9.15 million in cash and short-term investments. In contrast, its total liabilities stand at just $3.02 million. That said, Acurx Pharmaceuticals didn’t generate any revenue in its most recent quarter. This is because the firm is exclusively focused on research and development.

If and when Acurx Pharmaceuticals receives approval from the FDA, this will have a significant impact on its stock valuation. Until then, this penny stock remains a high-risk investment that is unable to generate income.

10. Phoenix Motor – Micro-Cap EV Automaker Focused on Commercial Buses and Trucks    

While Phoenix Motor might not be the next Tesla, this electric vehicle (EV) manufacturer is still worth considering. Phoenix Motor specializes in EV-based commercial vehicles. This includes everything from shuttle and school buses to flatbed and work trucks.

Its vehicles offer zero-emission and sustainable transportation services, which could appeal to government contractors. Phoenix Motor stock is listed on the NASDAQ and is currently valued at just $33.6 million. Its stock trades for $1.58 per share, which is down from its 52-week high of $1.94.

Phoenix Motor stock

That being said, Phoenix Motor is one of the best-performing penny stocks over the prior 24 hours – with gains of 58%. Moreover, Phoenix Motor stock is up 73% over the past five days. In terms of its financials, Phoenix Motor saw a 22.75% decline in revenue in its most recent quarterly earnings.

Furthermore, operating expenses increased by 35%. Phoenix Motor’s balance sheet is also concerning, with just $382,000 in cash and short-term investments. That said, it has $18 million in assets and just $10.3 million in total liabilities. Therefore, Phoenix Motor has a net positive valuation.

Our Methodology When Rating the Best Penny Stocks

We utilized the following methodology and analysis principles when ranking the best penny stocks to buy:

  • Industry: To ensure your portfolio is well-diversified, we covered a wide range of penny stock industries. This includes everything from media and cybersecurity to commercial EVs, apparel, and energy. Diversifying across many different industries helps you reduce your exposure and mitigate portfolio risk.
  • Market Capitalization: Most of the penny stocks selected have a micro-cap valuation of below $70 million. This will appeal to high-risk investors targeting significant growth. However, we also considered higher-cap penny stocks to reduce the overall portfolio risk and mitigate volatility.
  • Recent Performance: Penny stock investments are all about momentum. Therefore, we selected a range of penny stocks that have witnessed substantial gains in the prior 1-5 days of trading. For portfolio balance, we also included stocks that have a longer-term outlook.
  • Balance Sheet: One of the most important aspects when investing in penny stocks is the balance sheet. This determines how much operating capital the company has, alongside its short and long-term debts. The top penny stocks to watch have a positive balance sheet with plenty of cash and short-term investments to call on.
  • Earnings Reports: Our methodology also examined quarterly and annual earnings reports when selecting the best penny stocks to buy. We looked for companies with growing revenues and operating margins, alongside declining operating expenses. This highlights that the company is primed for sustainable long-term growth.
  • Developments and Regulatory Approval: Penny stocks can rise or fall by significant amounts when a new development is announced. For example, during times of increased conflict, cybersecurity and defense penny stocks perform well. Similarly, approval from a government agency – such as the FDA, can also help a penny stock witness sizable growth.

What are Penny Stocks?

According to the SEC, penny stocks are publicly traded companies with a share price of $5 or less. However, there are several other characteristics of penny stocks to be aware of.

First and foremost, many penny stocks trade on over-the-counter (OTC) markets. This means that investing in penny stocks can be challenging for retail investors. A specialist broker is required and they would need access to the OTC Markets Group – which is the leading US exchange for penny stocks.

To offer some insight, while the OTC Markets Group lists 12,148 penny stocks, it has a total market capitalization of just $1.2 billion. This means that the vast majority of S&P 500 constituents are worth more than the entire OTC Markets Group exchange. As such, most penny stocks have a micro-cap valuation.

OTC Markets Group This means that penny stocks are super-volatile and speculative. While a penny stock can increase by several hundred percentage points in one day, it can also lose the majority of its value before the market closes. Moreover, penny stocks attract limited liquidity. This means that you might face issues entering and exiting a trade.

Similar to the best micro-cap cryptocurrencies, penny stocks are aimed at high-risk investors who want to outperform the market. That said, we should note that not all penny stocks trade on OTC securities exchanges. Some of the best penny stocks discussed today trade on the NASDAQ, NYSE, and London Stock Exchange. This means that the best online stock brokers offer access to these penny stocks, so you won’t need a specialist OTC provider.

Why Invest in Penny Stocks?

Now that we’ve explained how penny stocks function, let’s explore why this marketplace is worth considering.

Potential for Significant Returns

In a nutshell, penny stocks are popular for their high-growth potential. Investors add penny stocks to their portfolio to target much higher gains than the broader markets. The reason that penny stocks can increase in value so quickly is they’re usually micro-cap companies.

For example, some of the best penny stocks discussed today are valued at below $70 million. This means that even a small amount of buying pressure can result in the stock increasing significantly.

  • Hub Cyber Security is a good example of this.
  • The cybersecurity firm has a market capitalization of just $67 million and over the prior five days, has increased by 214%.
  • Moreover, Hub Cyber Security stock has increased by 180% in just one day of trading.
  • This highlights a classic penny stock movement – rapid growth in a very short period of time.

In another example, Parazero Technologies stock has increased by over 285% in the prior day. This stock has an even smaller market capitalization of just $16.3 million.

And then there’s Acurx Pharmaceuticals. This healthcare stock is valued at just $43.1 million. In the past 24 hours, Acurx Pharmaceuticals stock has increased by 73%. And over five days of trading, the penny stock has increased by 171%.

Acurx Pharmaceuticals stock

The reality is that large-cap stocks like Amazon, Apple, and Microsoft won’t be able to replicate similar gains. Not in the same timeframe at least. This is because they have huge valuations, so it takes significant buying pressure to see sizable growth.

All that being said, there’s an important consideration to make when researching the best penny stocks. What goes up can just as quickly capitulate. For example, while a stock can increase by 100-200% in one day, it can also lose the majority of its value over the same period.

Invest in Growth Companies From the Ground Up

Penny stocks aren’t just suitable for short-term traders looking for a quick entry and exit. On the contrary, some of the best penny stocks to buy are long-term investments.

For example, some growth companies will initially list on OTC markets. They don’t meet the requirements for primary exchanges like the NYSE or NASDAQ. This might be because they don’t have a large enough valuation or the company doesn’t have enough stockholder equity. Either way, OTC exchanges can be a great way to find up-and-coming penny stocks before they explode.

  • For instance, consider a new EV company with a small market capitalization of just $10 million.
  • As the company increases production levels and sales, it will naturally see its valuation rise.
  • Several years down the line, the EV company could meet the requirements of a NYSE listing.
  • And if it does, it will be worth significantly more than the $10 million valuation you initially secured.

Therefore, penny stocks are ideal for growth investors looking for the next Tesla or Apple.

Own a Large Number of Shares

Some investors are attracted to penny stocks because of the low share price available. As per the SEC’s definition, penny stocks trade for under $5. This means that you can buy a large number of shares without needing to invest significant amounts.

For example, consider that Centamin – a penny stock involved in gold mining operations, currently trades at just 81p (about $0.66). This means that an investment of just $1,000 would get you over 1,500 shares.

Centamin stock price

Now consider the same $1,000 investment in a large-cap stock like Tesla. The current Tesla stock price is $258 – so you would get less than three shares with a $1,000 outlay.

Ideal  for Diversification Strategies

Choosing the best penny stocks to invest in is no easy feat. After all, on the OTC Markets Group exchange alone, more than 12,000 penny stocks are listed. There are thousands more when you factor in the NYSE, NASDAQ, and international exchanges.

On the flip side, having access to so many penny stocks makes diversification simple. This ensures that you’re not overexposed to a small number of companies.

  • For example, a good starting point is to short-list industries that you’re interested in.
  • You might consider anything from electric vehicles and energy to biometrics, pharmaceuticals, and cybersecurity.
  • You can then purchase a broad range of penny stocks from these industries.
  • If a particular industry is performing well, at least one of your penny stock investments has the potential to grow.

For example, cybersecurity and defense companies are seeing growth right now, considering the increased tensions between Israel and Hamas. Similarly, there’s also increased interest in oil and natural gas mining operations, considering energy prices remain high.

How to Pick the Best Penny Stocks to Invest in 

This section of our guide is the most important; we explain how to pick the best penny stocks for your portfolio. This ensures that you’re investing based on independent research, rather than third-party recommendations.

Recent Price Performance 

The first step is to research the markets for the top-performing penny stocks. Put simply, penny stocks are a reactive asset class – so there’s often a reason why companies see a rapid price increase.

For example, we mentioned earlier that Parazero Technologies stock has increased by 285% in the past five days. The reason for this is that Parazero Technologies has secured approval from the Australian government. This means the firm can operate its commercial drones in major Australian cities.

OTC Markets best performers

Now, once a penny stock witnesses stock price momentum, this often encourages others to invest. This is similar to how the best meme coins work, as cryptocurrencies are also based on hype and FOMO (fear of missing out). So, to get the ball rolling, do some research on which penny stocks have produced the biggest gains over the prior 1-5 days of trading.

Where to Find the Best-Performing Penny Stocks?

  • To find the best-performing penny stocks, it’s best to go directly to the source.
  • So, if you’re looking for penny stocks listed in the US – head over to the OTC Markets Group website.
  • Then, click ‘Market Activity’ and scroll down to ‘Advancers’.
  • This ranks the top penny stock gainers over the prior 24 hours.
  • It’s also worth checking the NASDAQ and NYSE websites, as these exchanges also list penny stocks.

Explore Trending Industries  

Focusing on the short-term price of penny stocks will only get you so far. In addition, you should also focus on specific industries. Depending on global events and broader market cycles, certain industries go on prolonged bull runs.

For example, consider a major data leak from a social media company. The likelihood is that cybersecurity and biometric penny stocks will benefit from the news. After all, there will be increased demand for these services to ensure that companies comply with stricter regulations on data privacy. Your strategy here is simple – search for up-and-coming penny stocks operating in this industry.

In another example, consider your strategy if oil and gas prices hit 5-year highs. In this instance, you’d want to search for penny stocks that benefit from high energy prices. This would include oil and gas firms that are actively involved in exploration and distribution.

Company Fundamentals and Performance    

Make no mistake about it – the best penny stocks have solid fundamentals. This means that the underlying business is performing well and that it has a positive long-term outlook. The most effective way to analyze a penny stock’s performance is to read its earnings report.

Now, we must stress that the availability of quarterly earnings reports depends on the exchange. For example, penny stocks listed on the NYSE and NASDAQ are legally mandated to release in-depth reports. This gives you a 360-degree overview of how the company performed in the prior three months. You can then compare this to previous quarters and other market competitors.

However, penny stocks listed on OTC exchanges don’t need to follow the same requirements. In many cases, limited financial results are published once a year. This makes it more difficult to analyze the company.

Nonetheless, if the penny stock is listed on a major exchange, you can view its most recent earnings call on Google Finance. This breaks down information such as:

  • Revenue
  • Operating Expenses
  • Net Income
  • Net Profit Margin
  • Earnings Per Share

The image below shows the most recent earnings report from BioNano Genomics – a penny stock involved in DNA structure advancements.

BioNano Genomics

The report shows that revenues increased by 29.87% when compared to 12 months prior. Although this is positive, the earnings report also shows that operating expenses increased by 23.83%.

Additionally, we can see that BioNano Genomics made a $38.91 million loss during the quarter. You’ll find that quarterly losses are common with penny stocks, as many are growth companies that are yet to establish themselves.

Ultimately, the best penny stocks to buy have growing revenues and net income, while keeping their operating expenses to a minimum.

Why Do Some Penny Stocks Not Generate Any Revenue?

  • When searching for the best penny stocks to buy now, you might come across companies that aren’t generating revenue.
  • These are likely companies that are in the very early stages of development. For instance, they might be developing a new product or service that hasn’t been launched to the market.
  • Moreover, young pharmaceutical companies will often operate without income sources. This is because they’re working on research and development, not to mention clinical trials.
  • On the one hand, investing in penny stocks without revenue streams is a high-risk move, especially if the balance sheet is weak. That said, if the company gets past its initial development stage and begins generating income, its stock price could increase significantly.

Balance Sheet     

In addition to company performance, the balance sheet is also crucial when researching penny stocks.

The balance sheet forms the lifeblood of a company – as it determines its financial health.

  • For example, the balance sheet shows how much cash (and short-term investments) the company has, alongside its short and long-term debt levels.
  • If the penny stock has too much debt and not enough cash, it could run into operational issues.
  • In turn, if the company isn’t able to raise additional funding, bankruptcy risks are a reality.

With this in mind, it’s wise to focus on penny stocks with a healthy balance sheet. This means having sufficient cash and assets, and minimal debt. In doing so, the company is able to operate efficiently without seeking external funding.

Acurx Pharmaceuticals balance sheet

Let’s look at an example to clear the mist.

  • The image above shows Acurx Pharmaceutical’s balance sheet, as per its most recent earnings report.
  • The balance sheet shows that Acurx Pharmaceuticals has $9.15 million in cash and short-term investments.
  • In contrast, the penny stock has just $3.02 million in total liabilities.
  • This means that Acurx Pharmaceuticals can cover its entire debt with cash and short-term investments three times over.
  • Overall, Acurx Pharmaceuticals has a sufficient balance sheet to operate efficiently.

Now let’s compare this to Hub Cyber Security – a cybersecurity penny stock that’s increased by 180% in the prior 24 hours.

  • In total, Hub Cyber Security has $65.98 million worth of debt on its books. This is a 20.07% increase from the prior year.
  • However, the firm only has $3.99 million in cash and short-term investments.
  • Although it has $74.79 million worth of assets, the majority aren’t easily converted to cash.
  • Therefore, Hub Cyber Security might be required to secure additional funding in the near future.

Do Penny Stocks Pay Dividends?

  • The vast majority of penny stocks do not have a dividend policy in place.
  • This is because most penny stocks have fragile balance sheets with limited cash and rising debt levels.
  • However, established penny stocks with a larger valuation do have the potential to pay dividends.
  • For example, Nine Entertainment is currently offering a running dividend yield of 5.56%. Similarly, the running dividend yield on Centamin stock is currently 4.38%.
  • Ultimately, investors don’t buy penny stocks for dividend income. Instead, the aim is for significant stock price increases.

Developments and Regulatory Approval    

The most successful penny stock investors monitor the market regularly. This enables investors to buy a penny stock as soon as a positive news story is developed. In doing so, you’ll get a first-mover advantage over the broader markets. Crucially, penny stocks can explode in value after a notable announcement.

  • For example, let’s say that you’re researching pharmaceutical penny stocks.
  • You come across a company that has just completed a clinical trial for a new treatment.
  • The treatment is now awaiting approval from the Food and Drug Administration (FDA) and the European Medicines Agency (EMA).
  • If either one of these government agencies approves the treatment – it’s almost certain the penny stock will increase in value.
  • This is because the pharmaceutical company can distribute its treatment to hundreds of millions of people.

It’s not just regulatory approval that can send a penny stock soaring. Additionally, notable partnerships, major contract agreements, or even acquisition rumors can yield similar results.

However, keeping tabs on thousands of penny stocks isn’t an effective strategy. This is why it’s best to niche down to a specific industry or market. This will enable you to become an expert in your chosen area and be aware of important news developments without delay.

What are the Risks of Penny Stocks?

Although penny stocks can be a lucrative investment, the risks are high.

Here’s what to consider before investing in penny stocks:

  • Liquidity Issues: The majority of penny stocks trade over-the-counter. OTC exchanges don’t attract anywhere near the same amount of liquidity as the NYSE, NASDAQ, and other major markets. A lack of liquidity means that you might have issues selling your penny stock investment. After all, to realize penny stock gains, you need somebody to purchase your shares. As such, you might be forced to accept a sub-par price to cash out.
  • High Volatility: Penny stocks operate in a highly speculative market. Moreover, most penny stocks are micro-cap companies. This means that you should expect high volatility levels when purchasing penny stocks. On the one hand, a penny stock can increase by hundreds of percent in one day. Conversely, a penny stock can also lose most of its value over the same period.
  • Limited Information: If your chosen penny stock trades on OTC exchanges, it doesn’t meet the same reporting requirements as large-cap companies. It might only be required to publish its accounts annually, meaning you won’t be able to regularly assess its performance. Moreover, penny stocks are rarely reported by mainstream financial news platforms. This means you’ll need to do lots of digging to stay updated with key developments.

Where to Get Penny Stock Tips

We’ve covered the basic of penny stocks, but there are many to choose from, and it’s important to do thorough research before investing.

There are lots of tools available online, but we think AltIndex is a great option for stock investors.

AltIndex – Get Free AI Stock Tips, Alerts, and Alternative Data

AltIndex is one of the best resources for penny stock traders. This user-friendly platform specializes in alternative data metrics, which means it generates stock recommendations based on unconventional information – such as social media sentiment analysis, website analytics, job postings, app downloads, employee sentiment, and financial news mentions.

AltIndex utilizes artificial intelligence and machine learning to analyze its findings. For example, the software will scan social media websites like Twitter and Facebook, look at a range of metrics, such as comments, followers, likes, and shares, and then determine whether social media sentiment is positive or negative on different stocks.

AltIndex review

This will then generate a ranking score, which ranges from 1 to 100. This reflects the likelihood that the stock will outperform or underperform the broader market. AltIndex then gives buy, hold, or sell ratings based on the score.

AltIndex tracks thousands of stocks from the NASDAQ and NYSE. Buy and sell signals are instantly delivered to your email inbox, making it easy to keep track.

AltIndex stock picking

AltIndex offers three pricing plans: $0, $29, or $99 per month, depending on how many stock recommendations you want. The plans comes with 1, 10, or 25 monthly predictions, respectively. There’s also an enterprise plan with unlimited predictions, but you need to contact the company to get a quote. All plans are flexible and can be canceled at any time.

Conclusion

Penny stocks are a risky asset class that can produce rapid gains or losses in a short period of time. Plenty of research is required when building a penny stock portfolio – so make sure you consider the risks before proceeding.

To help, you can use AltIndex, which provides a wide variety of tools and resources for stock investors.

References

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Kane Pepi

Kane Pepi is an accomplished financial and cryptocurrency writer who has an extensive portfolio of over 2,000 articles, guides, and market insights. With his expertise in specialized subjects such as asset valuation and analysis, portfolio management, and financial crime prevention, Kane has built a reputation for providing clear explanations of complex financial topics. He holds a Bachelor's Degree in Finance and a Master's Degree in Financial Crime, and is currently pursuing his Doctorate degree, which focuses on investigating the complexities of money laundering in the cryptocurrency and blockchain technology sectors. Kane's wealth of knowledge and experience in the field make…