11 Best Quality Penny Stocks to Buy According to Hedge Funds

7. RLX Technology Inc. (NYSE:RLX)

Revenue CAGR in the last 5 years: 52.15%

Net profit margin: 22.57%

Number of Hedge Fund Holders: 19

​​RLX Technology Inc. (NYSE:RLX) is a leading branded e-vapor company based in China, specializing in the design, manufacture, and distribution of electronic vapor products. The company’s advantage consists of a strong R&D base and market research that makes it possible to create e-vapor products tailored to adult smokers’ needs. The Shenzhen-based company ranked seventh on our recent list of 10 Chinese Penny Stocks to Buy According to Analysts.

RLX Technology Inc. (NYSE:RLX) achieved a strong performance in 2024, marking its seventh consecutive quarter of sequential revenue growth, with full-year revenues representing a 73% YoY increase. The company’s gross profit margin improved to 26.4% in 2024 while achieving a non-GAAP operating income of RMB 262.5 million for the full year. This financial success was primarily driven by international expansion following the termination of a significant noncompete agreement in November 2023, along with effective localized strategies for different markets.

Looking ahead, RLX Technology Inc. (NYSE:RLX) has identified that industry success will increasingly depend on refined operations, channel development, and product optimization rather than breakthrough new products. The company has strategically positioned itself by investing in team expertise, in-house product development, and regulatory compliance. Its commitment to shareholders remains strong, having returned approximately $122.9 million to shareholders in 2024 through share repurchases and dividends, with plans to continue returning substantially all non-GAAP net profit to shareholders. With a wide net profit margin of 22.57% in the latest fiscal year, RLX is one of the best quality penny stocks to consider.