Penny stocks often carry a notorious reputation in the investment world, infamous for their volatile nature and high-risk profile. However, while they are undeniably dangerous, thorough research can occasionally unearth gems that are genuinely intriguing from a speculative standpoint.
It’s fascinating to note that several of today’s corporate juggernauts essentially had their humble beginnings as top penny stocks. This underscores the potential for massive returns, albeit accompanied by significant risks.
While many might dismiss these low-priced shares, there are instances when Wall Street analysts themselves lean into this speculative domain, offering credibility to certain names. Those instances, in particular, spotlight what might be considered the best penny stocks to delve into.
Rekor Systems (REKR)
One of the most enticing penny stocks, Rekor Systems (NASDAQ:REKR) provides vehicle recognition and management systems powered by artificial intelligence. Specifically, it leverages AI to offer solutions in areas such as automatic license plate recognition (ALPR) and vehicle identification. Naturally, Rekor commands profound implications for law enforcement and smart cities.
Both areas feature significant upside potential, making REKR one of the top penny stocks from a narrative perspective. With law enforcement officers facing increasing pressures, using AI and machine learning to process menial tasks should boost efficiencies. Further, the integration of AI in society may help accelerate the development of smart cities, providing Rekor with a viable niche.
The problem? Its financials aren’t exactly up to snuff. Indeed, investment data aggregator Gurufocus warns that REKR suffers from six red flags. On the plus side, analysts peg REKR as a moderate buy with an average price target of $4.25, implying over 43% upside.
Matrix Service (MTRX)
Primarily focused on the hydrocarbon industry, Matrix Service (NASDAQ:MTRX) specializes in engineering, fabrication, infrastructure, construction, and maintenance services. Along with oil and natural gas, Matrix covers segments such as power, petrochemical, industrial, and others. It offers a wide range of services including tank construction and maintenance, industrial cleaning, and plant maintenance.
Fundamentally, the enterprise should benefit from the booming hydrocarbon energy market and it’s done just that. Since the start of the year, MTRX gained over 53% of its equity value. Most of that performance came in the trailing month, with MTRX swinging up an astounding 52%. Overall, in the past one-year period, Matrix returned shareholders over 115%.
Still, MTRX gets overlooked as one of the best penny stocks because of its so-so financials. Still, while the company suffered negative three-year revenue growth, recent data shows a steady recovery. Also, D.A. Davidson’s Brent Thielman pegs MTRX a buy with a $15 price target, implying over 54% upside.
Evolution Petroleum (EPM)
An independent oil and gas company, Evolution Petroleum (NYSEAMERICAN:EPM) specializes in acquiring, developing, and producing oil and natural gas properties. Its strategy often revolves around optimizing mature current production using specialized technology and capturing the remaining established reserves. Since the start of the year, EPM is exactly flat, which is an odd coincidence.
To be fair, Evolution is horrifically risky, there’s no question about it. Just in the trailing month, EPM hemorrhaged nearly 29% of its equity value. And that’s glaring especially because the underlying hydrocarbon sector has performed so well. Still, with a “swingy” name like EPM, a patient approach might yield tremendous gains. After all, little indication exists that suggests that energy prices will fade.
Also, Evolution features strong financials, including a robust balance sheet, excellent revenue growth, and consistent profitability. Also, shares trade at bargain earnings multiple of 6.67x. Lastly, Northland Securities rates EPM a buy with an $11 price target, implying nearly 58% upside.
Turtle Beach (HEAR)
Based in San Diego, California, Turtle Beach (NASDAQ:HEAR) is a popular gaming accessory manufacturer. With the rise of advanced video games and a surrounding ecosystem, Turtle Beach should have a bright future. Also, headwinds in the consumer economy should bode well for HEAR stock on a cynical basis. Generally, video games offer relatively cheap entertainment.
Since the start of the year, HEAR gained almost 30% of its equity value, reflecting the underlying company’s relevance. However, it’s definitely lost much of its mojo recently. In the trailing one-month period, Turtle Beach gave up over 13% of its market value. Still, speculators may take heart at the resilience of the video game industry. To be sure, Turtle Beach lacks the financial rigor of larger-capitalized enterprises. For example, it conspicuously suffers from negative operating and net margins. However, it’s also a no-debt entity, thus carrying financial flexibility.
Analysts rate HEAR a strong buy with a $15.25 price target, implying over 59% growth. Thus, it’s one of the best penny stocks to consider.
A shipping company, StealthGas (NASDAQ:GASS) focuses primarily on the transportation of liquid petroleum gas. Notably, it’s one of the leading carriers of LPG, with a significant fleet that operates both regionally and internationally. One of its key selling points is fleet diversity, allowing StealthGas to cater to different markets and trade routes.
Fundamentally, StealthGas represents one of the top penny stocks for the underlying commodity’s value to economies around the world. LPG primarily consists of propane along with butane. According to a publication on ScienceDirect, LPG represents the leading neat or neat-neat alternative fuel in the U.S. Therefore, GASS should be on your radar as a relevant investment.
Since the start of the year, shares have already gained almost 88%. That leaves many investors wondering if they’re going to end up holding the bag. However, Maxim Group’s Tate Sullivan pegs shares a buy with an $8 price target, implying over 63% upside potential. Thus, it may be one of the best penny stocks to consider.
An ingeniously simple and innovative enterprise, Worksport (NASDAQ:WKSP) specializes in the design, development, and production of tonneau covers. These are the protective covers often used for the cargo beds of pickup trucks. What makes Worksport stand out is its integration of solar technology. By developing tonneau covers with solar panels, the company can offer auxiliary power for its customers.
Moving forward, cynical economic developments may help bolster Worksport. With energy costs rising, both small businesses and fleet operators may see value in solar-integrated power solutions. Also, Worksport can tap into the outdoor enthusiast market, which saw significant demand during the Covid-19 disaster. Thus, it might even benefit from the revenge travel phenomenon.
To be sure, WKSP’s inclusion among penny stocks isn’t surprising. Financially, the company suffers from significant challenges, including deeply negative operating and net margins. Also, its long-term revenue growth is negative. Still, Maxim’s Sullivan believes WKSP is a buy with a $5.50 price target, implying 114% growth.
Vista Gold (VGZ)
A gold project developer, Vista Gold (NYSEAMERICAN:VGZ) is one of the riskiest penny stocks to consider. For one thing, the underlying gold development industry carries significant threats to shareholders. Basically, a high degree of uncertainty exists surrounding exploration projects. Also, these companies tend to be capital-intensive. You might find gold or you might find a money pit.
Still, Vista intrigues me because of its speculative potential. With the primary focus centered on the advancement of its Mt. Todd gold project (located in Northern Territory, Australia), stakeholders are banking on the nation’s resource wealth to turn true. Also, precious metals may see heightened interest due to the fear trade. To be 100% clear, prospective investors will be taking huge risks. Right now, it’s a pure-play exploration project, meaning zero revenue. Nevertheless, Vista Gold carries zero debt so that’s something to keep in mind.
Finally, H.C. Wainwright’s Heiko Ihle rates VGZ a buy with a $2.50 price target, implying nearly 444% upside potential.
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.
Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Josh Enomoto 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.