No matter what I have to say next, you should not buy penny stocks. They’re volatile, woefully unpredictable and can lead you to emotional reactions that ultimately hurt your finances. It’s no wonder so many internet gurus hawk these speculative enterprises. If things go right, they’re geniuses. If things go wrong, they merely weasel behind their “buyer beware” disclosures written in microscopic font.
Believe me, you have every reason to hate penny stocks and avoid them at all costs. Therefore, if you’re even thinking about the below speculative ideas, it’s totally your decision. I already said up front that this “investment” category is categorically dangerous. Still, if you want to roll the dice, you might as well stack the odds a bit in your favor. These are the penny stocks you may wish to consider (because I’m certainly not telling you to).
| GGB | Gerdau | $4.86 |
| BTE | Baytex Energy | $5.30 |
| CYH | Community Health Systems | $4.89 |
Gerdau (GGB)
As the largest producer of long steel in the Americas, Gerdau (NYSE:GGB) doesn’t represent your typical idea for penny stocks. Currently, the enterprise commands a market capitalization of $8.31 billion. However, shares have traded under and above the $5 level, which often signifies penny-stock territory. Further, its volatile as heck, featuring a 60-month of 1.63. Normal volatility based on the benchmark equities index should be 1.
Further, GGB trades all over the map. Since the start of the year, shares tumbled nearly 5%. However, it got off to an auspicious start in January. In the trailing one-year period, GGB gave up 20% of equity value. Still, connoisseurs of penny stocks may point out that Gerdau enjoys a decently stable balance sheet. For example, its Altman Z-Score is 3.46, reflecting modestly low bankruptcy risk.
Operationally, the company prints strong revenue and enjoys an outstanding net margin. Better yet, the market prices GGB at a forward multiple of 5.45. As a discount to projected earnings, Gerdau ranks better than 75.56% of the competition. Finally, Wall Street analysts peg GGB as a consensus moderate buy. Their average price target stands at $6.26, implying 27% upside potential.
Baytex Energy (BTE)
A Canadian energy company based in Calgary, Alberta, Baytex Energy (NYSE:BTE) engages in the acquisition, development and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford project in the U.S. Though one of the most fundamentally relevant penny stocks, BTE presently suffers from economic pressures. Since the January opener, it’s down 10%.
Further, in the trailing one-year period, BTE dropped 18% of equity value, making it quite volatile. Presently, its 60-month beta stands at a staggering 2.16. Still, intrepid participants of penny stocks won’t be taking comprehensively wild risks. For instance, Baytex’s three-year revenue growth rate pings at 16.5%, above nearly 69% of its peers.
Also, the market prices BTE at a trailing multiple of 3.34 times. As a discount to earnings, Baytex ranks better than 80.89% of the competition. Lastly, covering analysts peg BTE as a consensus hold. However, their average price target stands at $5.60, implying over 49% upside potential.
Community Health Systems (CYH)
Billed as a Fortune 500 company, you wouldn’t expect Community Health Systems (NYSE:CYH) outside of any other context to rank among the most volatile penny stocks. However, CYH has been trading around the $5 per share level. Further, it’s been all over the map. For example, since the Jan. opener, CYH gained over 11% of equity value. However, in the trailing year, gave up more than 58%.
With mobility like that, it’s no surprise that CYH’s 60-month beta stands at 1.73. Further, its financials leave much to be desired. For example, its Altman Z-Score sits at 0.88, indicating distress. In addition, significant risks exist that it could fall into bankruptcy in the next two years. Also, its three-year revenue growth rate sits at 6.8% below breakeven, worse than 84.45% of its rivals.
That said, the company does feature an operating margin of 7.3%, besting 63.65% of the field. Also, the market prices shares at a trailing multiple of 14.85. As a discount to earnings, Community Health ranks better than almost 70% of the healthcare providers industry. In closing, analysts peg CYH as a consensus moderate buy. Their average price target stands at $7.33, implying almost 50% 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.