I recently authored a few penny stock articles for InvestorPlace after discovering numerous overlooked investment opportunities. However, my past research was deep value-oriented, leading me to author another piece on growth penny stocks.
This article focuses on growth-orientated penny stocks, with a particular emphasis on disruptive companies. I ensured my picks possess portfolio diversification benefits by searching for stocks with idiosyncratic risk tilts. Sure, isolated risk should be considered before engaging with penny stocks, but as mentioned before, adding penny stocks to an already diversified portfolio can reduce risk while enhancing your returns!
Here are three disruptive penny stocks to consider if you’re a penny stock proponent such as myself.
Velo3D, Inc. (VLD)
Velo3D (NYSE:VLD) taps into the 3D printing arena, which is set to grow at a compound annual growth rate (CAGR) of 23.5% until 2030. However, Velo3D has a unique value proposition, which adds to that industry-based growth rate. The company offers a metal 3D printing solution to develop parts used for space exploration. Velo3D’s early-to-market approach is capital-intensive, but it is undoubtedly promising.
I must mention that Velo3D recently faced a few headwinds. A soft corporate research and development spending environment resulted in the company conceding that it might slide to a net loss of $17.4 million in its third quarter. In addition, questions have been raised regarding Velo3D’s ability to meet its debt covenants, consequently devaluing the company’s common stock.
Velo3D’s recent headwinds are transient. In fact, I’d go as far as saying they’re merely part of an innovative start-up’s journey. Continuous product quality enhancements and a planned 40% reduction in operating expenses assist the firm’s long-term prospects. On top of that, I think Velo3D will soon be a takeover target due to its unique offering and abundance of in-house intellectual capital.
VLD stock has shed more than 25% of its market value since the turn of the year, leaving it with a price-to-sales ratio of merely 0.47x. In addition, the company’s revenue surged by 71.92% in the past year, illustrating its growth potential.
Don’t miss out here!
Farmer Brothers Co. (FARM)
Farmer Brothers Company (NASDAQ:FARM), aka Farmer Bros., is a coffee and coffee supplies distributor with representation in adjacent businesses. The company’s strength lies in its nimble implementation. However, another component of Farmer Bros.’s growth story is the industry break-up within the coffee space, which has provided rise to a broader array of brands. Farmer Bros. possesses the necessary latitude and zeal to build on its 33.04% year-over-year growth, concurrently providing investors with scintillating returns.
A significant turning point occurred last month after Farmer Brothers swung to a second-quarter profit of 13 cents per share. In addition, Farmer Brothers experienced stronger demand, lifting its revenue by $600,000 to $89.5 million, while the company’s gross profits enhanced by 550 basis points to 40.4% amid lower commodity prices.
Due to its highly addressable end market, Farmer Brothers is set to benefit from sustainable long-term growth. In addition, further easing of input costs will widen Farmer Bros.’s profit margins, leading to better shareholder value.
Lastly, FARM stock is well situated from a market-based perspective. The stock has a price-to-sales ratio of only 0.21x, inciting absolute value. Additionally, FARM stock trades above its 50-, 100-, and 200-day moving averages, meaning a momentum trend has been shaped.
E3 Lithium Limited (EEMMF)
You’ve come to the right place if you’re looking for an overlooked lithium exploration company.
E3 Lithium‘s (OTCMKTS:EEMMF) objective is to become a leading integrated lithium company by mining its 16.0 million tonnes of measured and indicated lithium carbonate equivalent resources. Results from the firm’s geophysical report communicate its potential to ornament itself as Canada’s largest lithium producer. Therefore, best-in-class shareholder value isn’t out of the question.
The company has yet to deliver revenue as it is in its pre-production phase. However, E3 Lithium’s projects have promising case studies. For example, E3 Lithium’s flagship project, Clearwater, is set to deliver 20,000 tonnes per year to achieve a pre-tax internal rate of return of 32%.
E3 Lithium doesn’t have any realized valuation or growth metrics to speak of. However, Clearwater has an estimated earnings before interest tax depreciation and amortization (EBITDA) figure of $208.6 million. Therefore, by considering E3 Lithium’s enterprise value of $66.94 million, a back-on-napkin calculation delivers an alluring EV/EBITDA ratio of 0.32x.
On the date of publication, Steve Booyens 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.