Emerging companies that can make it big in the long-term on the back of an attractive business and big market potential
- These are the penny stocks with potential to deliver multibagger returns in the long term:
- Cronos (CRON): A strong cash buffer and gradual geographic expansion that will accelerate growth.
- Lithium Americas (LAC): Quality lithium assets with an after-tax net present value of $5.7 billion and high cash flow potential.
- Ring Energy (REI): Healthy production growth on the back of acquisitions and PV10 of $1.65 billion indicates undervaluation.
- Continue reading for more penny stocks.
7 Penny Stocks
When I look at penny stocks, there is scope for clear categorization. On one hand, there are penny stocks that are purely speculative in nature. These stocks can be considered for exposure for a few quarters and can skyrocket at the blink of an eye.
On the other hand, there are penny stocks with potential to rank among high-quality growth stocks of tomorrow. These penny stocks represent emerging businesses that have a sound management, good fundamentals, and a big addressable market for growth.
While the meme stock frenzy seems to be knocking at the door, let’s discuss penny stocks that are long term bets. Without doubt, these penny stocks have a high-beta. Further, even a seeming good business can fail as penny stocks represent companies with relatively limited financial buffer. However, if it’s a success story, the returns can be 20x or 50x in the next five to ten years.
Top 7 Penny Stocks
It therefore makes sense to allocate a small part of the portfolio to these penny stocks with potential.
Cronos (CRON)
If I had to choose one cannabis stock for the portfolio, it would be Cronos (NASDAQ:CRON). There are several reasons to believe that Cronos has millionaire-maker potential.
The first point to note is that Cronos commands a market valuation of $1 billion. As of Q1 2024, the Company reported a cash buffer of $855 million. It’s clear that valuations are significantly depressed. With regulatory headwinds for the cannabis industry gradually waning, Cronos has a big addressable market in U.S. and Europe.
I also like the fact that Cronos has been conservative in using its cash buffer. The Company is waiting for the right time and opportunity to go aggressive. However, it’s worth noting that in the last two quarters, Cronos has entered new markets of Germany, Australia, and the United Kingdom. Prior to this, the Company had presence in Canada and Israel.
Revenue for Q1 2024 increased by 30% on a year-on-year basis to $25.3 million. With gradual geographic expansion, the Company is positioning itself for accelerated growth in the coming quarters. The Company further expects net change in cash to be positive for 2024.
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Lithium Americas (LAC)
The potential success story for Lithium Americas (NYSE:LAC) is purely based on its asset potential. The Company is the owner of the Thacker Pass asset that has an after-tax net present value of $5.7 billion. Further, the asset has a mine life of 40 years. Once the both phases of are operational, the asset is likely to deliver an average annual EBITDA of $2 billion. This puts into perspective the extent of undervaluation with Lithium Americas currently having a market valuation of $790 million.
Of course, production is likely to commence in 2027 and investors need to hold patiently. However, this is the best time to consider exposure with sentiments being excessively negative on the back of lower lithium prices.
I must add here that there have been multiple positive business developments. Last year, General Motors (NYSE:GM) infused $650 million in two tranches for financing the construction. GM also has an offtake agreement for 10 years from the first phase of the project. In March, Lithium Americas received a conditional commitment for a $2.26 billion loan from the U.S. Department of Energy. With these positives, it’s a matter of time before LAC stock surges higher.
Ring Energy (REI)
Among emerging oil & gas companies, Ring Energy (NYSE:REI) hold immense potential. Crude oil has been subdued on macroeconomic headwinds and it’s not surprising that REI stock has remained sideways in the last 12 months. In my view, this is a golden opportunity to accumulate for multibagger returns.
It’s worth noting that Ring Energy currently commands a market valuation of $380 million. In comparison, the PV10 (present value of estimated future oil and gas revenues, net of forecasted direct expenses) of assets is at $1.65 billion. Purely based on asset valuation, REI stock is poised for five-bagger returns from current levels.
Another important point to note is that between 2018 and 2023, Ring Energy has increased production at a CAGR of 26%. Robust growth has been on the back of multiple acquisitions. The management therefore has a good track record of pursuing inorganic growth. With high financial flexibility, further acquisitions can boost the cash flow potential.
Yatra Online (YTRA)
Yatra Online (NASDAQ:YTRA) is a micro-cap that holds immense potential in the long term. As an overview, Yatra is an online travel company in India with services that include air ticketing, hotel booking, holiday packages, among others.
An important point to note is that Indian travellers will be the fourth largest global spenders by 2030 with expenditure expected to surge to $410 billion. As one of the largest players in the country, Yatra is positioned to benefit.
Specific to Yatra, there is a key differentiating factor amidst competition. The Company is the largest corporate travel player in India with a customer base of 800 large corporate. Yatra estimates that the addressable employee base is more than seven million. This is a big market for the Company.
Additionally, Yatra has been making inroads in the consumer business. The Company estimates that the online customer penetration for hotel and air bookings is 38%. Therefore, there is ample headroom for growth in the next five to ten years.
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Blink Charging (BLNK)
Investment in EV charging infrastructure is the key to potentially higher adoption of EVs in the coming years. Among emerging companies providing EV charging infrastructure, Blink Charging (NASDAQ:BLNK) is attractive. After a sustained period of correction, BLNK stock seems to be in a consolidation rage. It’s likely that a breakout will follow considering positive business developments.
The first point to note is that Blink is on a healthy growth trajectory. For Q1 2024, the Company reported revenue growth of 73% on a year-on-year basis to $37.6 million. With U.S. and Europe as key markets, it’s likely that stellar growth will sustain.
The second positive is that Blink is moving towards EBITDA break-even. The Company has guided for positive adjusted EBITDA by December. If this is achieved, BLNK stock is likely to surge higher. It’s worth noting that as the number of charging stations installed swells, service revenue growth has been robust. This will support EBITDA margin expansion beyond 2024.
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IAMGOLD (IAG)
It’s been a breakout year for gold and I believe that the positive momentum is likely to sustain. The reasons to be bullish include potential rate cuts and high geopolitical tensions globally.
While there are some large gold miners that are attractive, IAMGOLD (NYSE:IAG) is an emerging miner with multibagger potential. Even after a 50% rally in the last 12 months, IAG stock trades at a forward P/E of 14.8.
Specific to the Company, there are multiple reasons to be positive. First, IAMGOLD has high financial flexibility and ended Q1 2024 with a liquidity buffer of $693.8 million. Further, in April, S&P upgraded the corporate credit and senior notes ratings from CCC+ to B- with a stable outlook. I expect continued improvement in credit metrics as higher realized gold price translates into robust cash flows.
In terms of assets, the Company commenced production in the Cote Gold mine where IAMGOLD has 70% stake. The asset is the third largest gold mine in Canada with a remaining reserves life of 18 years. In the next few years, the asset is likely to deliver healthy production growth. Other attractive assets in the pipeline include Gosselin, Nelligan and Chibougamau district.
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Solid Power (SLDP)
Solid Power (NASDAQ:SLDP) is another penny stock with potential to be a multibagger. The Company is involved in the commercialization of solid-state batteries. After an extended period of downside, SLDP stock has trended higher by 17% in the last six months. This has been backed by positive news and I expect the rally to sustain.
One reason to be bullish on Solid Power is the backing of strong partners. In December 2022, the Company licensed its cell design and manufacturing processes to the BMW Group (OTCMKTS:BMWYY) to allow for parallel research and development activities.
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DISCALIMER :- I Am Not a Sebi Registered Analyst..All Posts/Calls Shared Are Just For Educational Purpose Only.. Non Advisory, DISCRETIONAL, NO Claims, Rights Resevered..I Am Not Responsible For Your Losses.. Consult Your Financial Advisor Before Taking Any Position