Penny stocks have a well-deserved reputation for low quality, high risk, and intense volatility. However, by practicing due diligence, you can discover some hidden treasures in the most unexpected places. Below, you’ll find updates on previously discussed penny stocks from this column, followed by a few new intriguing and inexpensive trade ideas that are still flying under most investors’ radar.
Some of the set-ups describe below may no longer be relevant or intact as of the time you read this article. Please conduct your own due diligence. Many stocks mentioned here were also discussed in the Peter Leeds Newsletter. Peter may own shares in some of the investments mentioned, in which case that fact will be clearly indicated. Please note that penny stocks are notoriously volatile.
First, Some Updates
TOMI Environmental Solutions, Inc. (TOMZ)
In what was otherwise a difficult month for many penny stocks, with many of them marking significant losses amid a widespread flight to safety, TOMI Environmental Solutions, Inc. (TOMZ) actually saw an approximately 35% gain during the past month on coronavirus fears picking up again. Given its strong financials (including a rock-solid balance sheet and gross margin) and increasing concerns around the omicron variant, TOMI Environmental Solutions’ share prices may see further growth in the months ahead.
Denison Mines Corp. (DNN)
In contrast to TOMI Environmental Solutions, uranium exploration and development firm Denison Mines Corp. (DNN) had a uniformly rough month, sinking approximately 25% over the past month. It is still up almost 135% over the past year, however, in a testament to the market’s rekindled interest in nuclear energy plays.
The demand for nuclear energy should grow massively in tandem with governments trying to curtail fossil fuel usage over the next few years. Denison Mines’ triple-digit quarterly revenue and earnings per share (EPS) growth, combined with a near-90% profit margin and good balance sheet, may suggest that the company is well placed to benefit from the trend over the next year.
Some New Ones
Playstudios, Inc. (MYPS)
Playstudios, Inc. (MYPS) has a great balance sheet, with ample liquidity of $380 million for mergers and acquisitions (M&A)—indeed, management says it’s actively looking for new games to add to its roster—as well as an upcoming $50 million share buyback and overall healthy revenue numbers, which until recently were seeing repeated annual double-digit growth.
While daily average users (DAU) were down substantially for Playstudios in the most recent quarter (-16% vs. the previous quarter), average revenue per user for the same period is up by 20% vs. the previous quarter. This substantiates CEO (and founder) Adam Pascal’s belief that, while the quantity of users has decreased, their quality has risen.
A fifth wave of the coronavirus may also benefit user numbers, sending them back inside to their devices. This could consequently lift Playstudios share prices over the next year.
Ambev S.A. (ABEV)
Ambev S.A. (ABEV) is looking undervalued right now at a price of only $2.80 per share (as of the time this article was being composed) versus a target price of $3.51 and two fairly recent ratings upgrades over the past four months.
The price-to-sales ratio of 0.61 is also very healthy for such a low-priced equity. Furthermore, average five-year EPS growth of almost 40%, as well as 56% quarterly EPS growth, likewise indicate that Ambev stock deserves a higher price than it’s currently seeing. Notably, Ambev also appeared in Investopedia’s Top Beer Stocks for Q1 2022, scoring especially high for value.
Best Brokers for Penny Stocks
Interactive Brokers’ very low per-share trading commission of $.005 ($1 minimum per trade) and up-to-the-split-second real-time margin calculations are ideal for penny stock traders. IBKR Lite clients can trade penny stocks for $0.
Low commissions, maximum 1% of trade value for IBKR Pro, $0 for IBKR Lite
Streaming real-time data, including account information
IBot, IB’s AI-powered online assistant, can help find features
Data streams on only one device at a time
Traders Workstation a steep learning curve
IBKR Pro customers charged fees to trade, though they are low
Schwab’s research pages point out the exchange on which a stock trades, which will keep you informed of the inherent risk. There are a variety of platforms available; the StreetSmart platforms have customizable charting and streaming real-time quotes. Schwab does not charge trading commissions on all stocks (including penny stocks) and ETFs.
Excellent screeners available on StreetSmart Edge
Free access to a wide array of news feeds
Strong customization and personalization options on StreetSmart Edge
The sheer number of features and reports available sometimes overwhelming
Transaction history for just 24 months online
Uninvested cash not swept into a money market fund
Penny stocks are volatile and can generate catastrophic losses. Price levels in this article are hypothetical and do not represent buy recommendations or investment advice. Keep in mind that it’s your responsibility to make trading decisions through your own skilled analysis and risk management.
Peter Leeds is the author of several books, including the international bestseller, “Penny Stocks for Dummies.” He and his team also issue a newsletter devoted exclusively to penny stock picks and analysis, as well as a popular YouTube channel PeterLeedsPennyStocks.