3 penny stocks that will cost you less than $1 each

Summary

  • Small-cap companies' transition to next stages provides opportunities for investors to take part in the value creation. 
  • Penny stocks investing offers high growth companies or even special situations like incumbent companies falling out of the mainstream market.

Penny stocks provide decent opportunities to assess the long-term potential of a company. Most of the times, penny stocks are high-growth small companies. Meanwhile, a continued erosion of market value may also put a company in the category of penny stock. 

For instance, Myer Holdings (ASX:MYR) closed at $0.32 on 17 February. MYR stock has lost its value significantly over the years and has a market capitalisation of about $275 million. It reported sales of over $2 billion in FY20. 

It becomes imperative to conduct due diligence in any investments, and for penny stocks – the risks should be coherently evaluated by any investor. Penny stocks will mainly include high-growth small business or battered-down big companies, which could mean high-execution risks or deep value.  

Source: Thomson Reuters, Refinitiv (rebased to 100)

Good Drinks Australia (ASX:GDA)

Good Drinks Australia is an independent brewer and has a host of brands. It also houses world-class breweries, which are also upgraded to improve output, efficiency, and quality.

Late in January, Good Drinks reported unaudited half-year numbers for FY21. Revenue was up 42% at $27.4 million, while gross margins moved to 71% from 68% in pcp. It also improved EBITDA significantly to $7.1 million from $0.3 million in pcp. 

Source: GDA Presentation, 27 January 2021

Sales were driven by volume growth of 39% compared to the same period last year. The company said first-half results validate a five-year view. It is growing distribution aggressively with 20% growth in Western Australia and 37% growth in the East Coast. 

During the half year, Good Drinks produced 9mL and estimates to produce 8mL in 2H. Its brands are currently using 46% of capacity, therefore more room for growth. The facility makes about 45 different SKUs. Moreover, GDA has low-cost and large-scale output capabilities. 

GDA shares last closed at $0.077.

Fluence Corporation Ltd (ASX:FLC)

Fluence Corporation is a water treatment solutions provider, servicing packaged water and wastewater. It has core operations in the Middle East, North America, South America, and Europe.

Late in January, the company reported fourth-quarter and year-end update. It was underlying EBITDA positive in FY20 at $1.4 million as compared to an EBITDA loss of $23.6 million in FY19.

Source: FLC Presentation, 29 January 2021

Revenue was up 58% to $96.5 million for the year. The company lowered its operating expenses by 28% to $29 million from $40.1 million last year. In the last quarter, revenue was up 51% to $23.5 million. 

Similarly, Fluence delivered positive operating cash flow of $33.4 million in Q4, and the cash balance was $31 million at the end of December 2020. It continues with strong sale growth and partner engagement in China, the Southeast Asia, and the Middle East. In FY21, the company expects SPS sales within $35-50 million and a positive EBITDA.

FLC shares last closed at $0.22.

Vmoto Limited (ASX:VMT

Vmoto is a global automobile company, specialising in high quality electric powered two-wheeler automobiles. It combines European design, high performance, competitive products with low cost Chinese manufacturing.

Earlier this month, Vmoto released a market update regarding its fourth-quarter and year-end numbers. It had been a strong year for the electric two-wheeler company as it sold 23.547 units, which is 18% higher than FY19. 

Source: VMT Update, 1 February 2021

International units sales were up 24% to 21,416 units. At the end of FY20, the company had $15 million in cash and no debt, while positive operational cash flows continued in the fourth quarter. It is launching three new electric two-wheelers in 1QFY21 at the online World Premiere event. 

FY21 has also commenced on a positive note. Vmoto secured an order of 5,904 units from a customer. As of 1 February, it had orders of over 11,000 units. Besides, it expects sales to grow, driven by new customers and repeat orders from existing customers. 

Vmoto’s products are gaining traction in the two-wheeler community and the business-to-consumer market. But its business-to-business sales are growing strongly amid rising interests from ride sharing, food delivery, and other mobility customers. 

VMT shares last closed at $0.48.

Penny stocks provide decent opportunities to assess the long-term potential of a company. Most of the times, penny stocks are high-growth small companies. Meanwhile, a continued erosion of market value may also put a company in the category of penny stock. 

For instance, Myer Holdings (ASX:MYR) closed at $0.32 on 17 February. MYR stock has lost its value significantly over the years and has a market capitalisation of about $275 million. It reported sales of over $2 billion in FY20. 

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