There was no dearth of multibagger penny stocks in 2021. However, 2022 has been a year to forget when it comes to returns from penny stocks.

Some indication comes from the fact that the iShares Micro-Cap ETF (NYSEARCA:IWC) is down by almost 20%  year to date.

If we look at the positives, the speculation has declined significantly. Frothy valuations seem to be a thing of the past. On the contrary, potential multibagger penny stocks look undervalued.

This view however does not imply that it’s a good time to go overboard on penny stocks. I would remain overweight on blue-chip stocks with selective exposure to growth stocks.

Within the growth stock portfolio, some exposure can be considered to potential multibagger penny stocks in the next few years.

I believe that these stocks are representative of companies with a good business model. There is potential in these businesses to generate healthy cash flows and create value for shareholders.

Borr Drilling (BORR)

With energy prices remaining firm, Borr Drilling (NYSE:BORR) stock has surged  124% in 12 months, making it one of the multibagger penny stocks that can keep paying off.

With the growth outlook remaining positive, it’s among the top multibagger penny stocks to consider.

Currently, Borr Drilling has a fleet of 24 rigs that includes 2 rigs under construction. For Q3 2022, the company reported revenue of $107.9 million. For the same period, adjusted EBITDA was $43.9 million.

For year-to-date 2022, Borr Drilling has been awarded contracts worth $650 million. With robust order intake and an increase in cash flow visibility, the outlook is bullish for BORR stock.

Furthermore, with higher day rates, the company’s EBITDA margin has been improving. Sustained improvement in margin and cash flows is a key stock upside catalyst.

It’s also worth noting that the company ended Q3 2022 with cash and equivalents of $279 million. This provides flexibility for expanding the fleet as asset utilization remains above 90%.

Solid Power (SLDP)

Solid Power (NASDAQ:SLDP) stock is an attractive bet in the solid-state batteries space after a meaningful correction.

It’s expected that the market size for solid-state batteries will touch $13.1 billion by 2030. This presents a big market opportunity for early movers.

Currently, the company is in the development stage, which will be characterized by cash burn. However, there are potential catalysts for stock upside in 2023. Solid Power commenced installation of its EV cell pilot line in June.

The company had earlier expected to deliver silicon EV cells to automotive partners by the end of the year. However, with some delays, the delivery for validation testing is likely in 2023. The company’s automotive partners include Ford (NYSE:F) and BMW (OTCMKTS:BMWYY).

It’s worth noting that the company closed Q3 2022 with a liquidity buffer of $507 million. This provides ample financial flexibility to invest in the production line and R&D.

Potential positive news from automotive partners in 2023 can be a big catalyst for SLDP stock.

Tilray Brands (TLRY)

There might be some frustration among investors after a long delay in federal-level legalization of cannabis.

The same is reflected in cannabis stocks with Tilray Brands (NASDAQ:TLRY) trending lower again.

I consider this as an opportunity for exposure to this high-risk bet. If the legalization story plays out well, multibagger returns will come at the blink of an eye.

I must add here that business developments for Tilray Brands have been positive. The company has been building strategic infrastructure in the U.S. through the acquisition of brewing companies.

Tilray also has an increasing presence in Europe and Germany recently legalized recreational cannabis. The company already has a leadership position in Germany in the medicinal cannabis segment.

Tilray expects to be free cash flow positive in all business units in financial year 2023. This is good news from a financial perspective coupled with the fact that the company has a strong balance sheet.

Riot Blockchain (RIOT)

With the crypto winter being longer than expected, Bitcoin (BTC-USD) mining stocks have plunged.

I see value in a few stocks, but it comes with a meaningful risk. Exposure to crypto stocks should therefore be limited.

On the other hand, it would not take time for some quality crypto stocks to deliver multibagger returns. That’s in a scenario of Bitcoin reversal. Riot Blockchain (NASDAQ:RIOT) is an attractive bet at a market capitalization of less than one billion.

The first point to note is that Riot reported $255 million in cash as of Q3. Further, the company had 6,766 Bitcoin in the balance sheet. There is ample financial flexibility to navigate an extended period of crypto downturn.

Another bullish factor is continued addition in hashing capacity. As of October, the company reported capacity of 6.9EH/s. The company continues to guide for an increase in capacity to 12.5EH/s by Q1 2023. This would translate into significant growth in digital assets.

Kinross Gold (KGC)

Kinross Gold (NYSE:KGC) has an attractive dividend yield of 2.96% and the stock looks poised for a reversal rally.

During the year, Kinross sold assets in Russia and Ghana. This has translated into downward revision in production guidance. However, the company sits on a total liquidity buffer of $2 billion as of Q3 2022.

Besides dividends and share buyback, it’s likely that the resources will be used for opportunistic asset acquisition.

Even if there is no addition to existing assets, Kinross expects stable gold production through 2025. With an attractive all-in sustaining cost, there is visibility for sustained free cash flows. With these factors in consideration, KGC stock looks attractive.

I also believe that gold has bottomed out. With factors of decelerating GDP growth and geopolitical tensions, the precious metal has upside from current levels.

Electrameccanica Vehicles (SOLO)

From the electric vehicle segment, Electrameccanica Vehicles (NASDAQ:SOLO) stock is a potential multibagger.

The company comes with a unique offering of a single-seat electric vehicle. Besides this differentiating factor, the base price of the SOLO model is $18,500. This is likely to attract buyers.

Another point to note is that Electrameccanica also has a delivery-oriented SOLO Cargo model priced at $24,500. This model opens the market for restaurant delivery, among others.

For Q3 2022, the company reported production of 103 vehicles and delivery of 64 SOLOs. Of course, the company is still at an early stage and it remains to be seen if deliveries accelerate meaningfully.

I like the fact that the company has an asset-light business model. This lowers the initial capital requirement and Electrameccanica has been focused on investing in marketing and sales.

Electrameccanica also has a cash buffer of $173 million, which provides flexibility for investment in expansion. Recently, the company also got a license to invest in Arizona.

AppHarvest (APPH)

AppHarvest (NASDAQ:APPH) looks attractive among indoor farming companies with significant impending expansion.

AppHarvest claims to be using 90% less water than traditional farming with yield that can be more than 30 times the conventional farming methods.

In October, AppHarvest announced the commencement of shipments from its 15-acre farm. Further, this month the company commenced operations in another 30-acre. Overall, AppHarvest has guided for operations on 165 acres by the end of the year.

Therefore, significant revenue growth is impending in 2023 and beyond. This is a potential catalyst for APPH stock upside. On the flip side, the company has guided for EBITDA loss in the range of $67 to $72 million. However, with economies of scale, margin improvement is likely in the coming years.

Overall, APPH stock has plunged by 70% for year-to-date 2022. Even with some financing concerns, the correction seems overdone.

On the date of publication, Faisal Humayun did not hold (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.