Penny growth stocks are all the rage for investors seeking explosive returns. With the market cycle potentially shifting and the Federal Reserve poised to cut interest rates up to three times this year, now could be an opportune time to grab some neglected penny stocks before they take off.
While recessions have historically occurred more frequently in post-election years, I’m optimistic we can avoid an economic downturn in the near term given the continued labor market strength. Even if a recession were to arise, many penny stocks already trade at depressed levels, so the remaining upside outweighs the downside risks.
In other words, the stars are aligning for massive penny growth stock breakouts. I’ve uncovered seven relatively unknown penny growth stocks that can deliver multibagger returns. Each trades around $5 or less per share but exhibits early signs of a huge move higher. Let’s take a look at the penny growth stocks!
Penny Growth Stocks: Navitas Semiconductor (NVTS)
Semiconductor stocks have been the high flyers over the past year, handsomely outperforming the broader market. The group has been driven largely by Nvidia’s (NASDAQ:NVDA) success, but the sunny outlook remains intact for the overall semiconductor industry. Navitas Semiconductor (NASDAQ:NVTS) is in the gallium nitride (GaN) integrated circuits business.
As the industry leader in GaN, Navitas packs drive, control and protection into a single easy-to-use integrated circuit. These GaNFast ICs deliver up to 100x faster switching speeds while cutting energy consumption by 40%. However, Navita’s stock has struggled to gain altitude. Shares have whipsawed between $3.50 and $10.50. Plus, a recent decline has dragged the stock under the $5 threshold to a penny level of $4.4 as I write this — nearing the $3.50 floor. I view this as an opportune entry point before a recovery takes hold, supported by strong core financials. The risks are there, but hey, you can’t have a multibagger candidate and safety at the same time!
Navitas grew Q4 revenue an impressive 111% to $26 million, surpassing estimates by over 2%. The glaring concern is losses, as the company lost $32.6 million in the quarter for a dismal -125% net margin. So, why do I remain bullish? Primarily because of the company’s robust $153 million cash position and negligible debt, which provides it with ample funding to bridge the gap to profitability. Analysts forecast profits in 2026, expanding substantially by 2027 to produce a modest P/(2027)E ratio of just 9x. Meanwhile, sales are expected to triple from $113 million in 2024 to $450 million in 2027. Given such tremendous growth prospects, I see Navitas trading at a highly undervalued level.
Taseko Mines (TGB)
Taseko Mines (NYSEMKT:TGB) is a Canada-based copper miner seeing its fortunes rise on the back of strong commodity prices. The company generated revenue of CAD 525 million in 2023, a 34% increase versus the prior year, thanks to expanded copper output and a step-up in Taseko’s stake in the Gibraltar Mine to 87.5%. Net income rang in at CAD 83 million (CAD 0.29 per share), while adjusted net earnings were CAD 44 million (CAD 0.15 per share).
Beyond operating Gibraltar, Taseko is advancing the Florence Copper Project, a major copper asset in Arizona. With copper prices holding near $4, relatively high levels compared to the sub-$2.50 pricing before the pandemic, the commodity outlook remains upbeat. I believe copper will stay lofty over the long haul.
Taseko is forecasted to generate (forecasts are in USD) 9 cents in EPS for all of 2024, with EPS potentially approaching 40 cents by 2026. Over the same period, revenue could climb from $388 million to $617 million. At current share prices, you’re paying a bargain 5x 2026 EPS multiple. While not without risks, I believe the risk-reward ratio tilts favorably for Taseko to potentially deliver robust returns.
Penny Growth Stocks: Digital Ally (DGLY)
Digital Ally (NASDAQ:DGLY) produces and sells an array of digital imaging, storage and disinfectant devices. Its products are mostly used in law enforcement and security settings. The company is comprised of three divisions: Video Solutions, Revenue Cycle Management and Entertainment. It’s quite the revenue mix for a penny stock player, with a small market cap of just $7.1 million.
Financial results have deteriorated lately, evidenced by the pullback in Digital Ally’s stock price. Volatility and losses are very normal for microcap names like this. Regardless, I’m more interested in the company’s video offerings for police departments like, body and dash cams. With the right product and sales strategy, these niche devices could gain broader adoption among law enforcement agencies, especially as AI features are incorporated.
Admittedly, Digital Ally ranks as the most speculative name on this list. Forecasts are challenging to pin down, given the small stature of the company. While losses are expected for at least the next two years, I’m mostly focused on the potential for new contract wins that could propel the stock higher. The upside appears worth the risk at current prices. The sole Wall Street analyst rating puts the one-year upside potential at 301%.
High Tide (HITI)
Cannabis stocks have fallen out of favor as the initial legalization fervor continues to fade. While the group no longer grabs headlines, compelling plays still exist for discerning investors. High Tide (NASDAQ:HITI) ranks among my top cannabis picks, having previously recommended it near $1.25 before the current $1.80 level. But in the volatile world of penny stocks, that’s hardly much upside.
High Tide has been trading sideways for two years now between $1 and $3. A breakout above $2.50 could materialize in the next two quarters if expectations are met or exceeded. The company is forecasted to break even in Q4 2024, followed by significant earnings growth. At current prices, you’re paying a modest 5x 2028’s expected EPS. Revenue is projected to surge from $388 million in 2024 to potentially over $1 billion by 2030 if the U.S. legalizes the substance this decade.
Already performing well in Canada with its sticky discount club model, High Tide looks poised to deliver multibagger returns in a multi-year timeframe. This is one cannabis name I’m happy to stick with through the ups and downs.
Penny Growth Stocks: Iteris (ITI)
Iteris (NASDAQ:ITI) seems positioned to ride two key trends — infrastructure investment and the artificial intelligence hype. As governments commit billions to upgrade transportation infrastructure, demand appears rock-solid for Iteris’ AI-powered mobility solutions. Its ClearMobility platform leverages AI to optimize infrastructure planning and maintenance. With advanced video sensors and radars to monitor intersections of every size, Iteris can capture a significant share in this high-growth market.
Despite over double-digit revenue growth, ITI’s modest 1.2x forward sales multiple diverges from the company’s strong fundamentals. Iteris grew revenue by 17% in 2023, though net losses increased to $15 million from $7 million. Near-term losses aren’t concerning given the long runway for Iteris’ cloud-based infrastructure monitoring systems. Analysts forecast profitability in 2024, with EPS potentially doubling from 28 cents to 35 cents in 2025 alongside continued double-digit revenue growth. Substantial margin expansion could ensue long-term — a common outcome when companies capitalize on megatrends. This is definitely one of the best penny growth stocks if you want to balance risk-return.
Velo3D (VLD)
Velo3D (NYSE:VLD) is a leading metal 3D printing technology purveyor focused on mission-critical components. Blue chip partners like SpaceX, Honeywell (NASDAQ:HON) and Lam Research (NASDAQ:LRCX) validate VLD’s solutions. After bottoming out in February, shares have skyrocketed 139%. However, small companies like Velo3D, with a $139 million market cap tend to be volatile. Another crash could certainly occur.
Still, the financials look promising for this early-stage high-growth company. Despite losses currently, Velo3D holds a sturdy $72 million cash position to fund operations. Losses are forecasted to shrink to a fifth of 2023’s amount by 2025, alongside revenue potentially rising from $107 million to $172 million.
Although the new order backlog has slipped recently, that could reverse as 3D printing gains more mainstream adoption. If Velo3D properly scales up, robust margins usually follow. This penny growth stock holds intriguing long-term multibagger potential.
Fusion Fuel Green (HTOO)
Fusion Fuel Green (NASDAQ:HTOO) provides innovative and cost-competitive green hydrogen solutions. Its modular solar-to-hydrogen tech combines solar concentration and a proprietary electrolyzer to produce zero-emission hydrogen at low cost.
Fusion Fuel has inherent risks as it is still pre-revenue. However, sentiment has turned positive lately, with shares up over 220% since November 2023. E.U. grants for green hydrogen sparked investor enthusiasm. HTOO could generate $5.6 million in revenue in 2023, quickly expanding to $105 million by 2026, per estimates. Profitability is projected for 2026 as well.
You’re paying a reasonable 23x 2026’s expected earnings, dropping to just 4x by 2030. If Fusion Fuel executes successfully, multibagger returns look attainable. I’m cautiously optimistic hydrogen’s time to shine has arrived. It looks like a good bet if you’re looking for more high-risk, high-reward penny growth stocks.
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Omor Ibne Ehsan 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.
