11 Best Quality Penny Stocks to Buy According to Hedge Funds

2. Shoals Technologies Group, Inc. (NASDAQ:SHLS)

Revenue CAGR in the last 5 years: 25.50%

Net profit margin: 6.04%

Number of Hedge Fund Holders: 31

​​​Shoals Technologies Group, Inc. (NASDAQ:SHLS) is a US-based company specializing in electrical balance of systems (EBOS) solutions for solar energy projects. Its product offerings include cable assemblies, combiner boxes, junction boxes, transition enclosures, and wireless monitoring systems, designed to streamline installation and enhance system performance. The company’s primary goals include improving the efficiency of its EBOS solutions, aiming to reduce labor costs and improve reliability in solar installations, making them more appealing to the mass market. SHLS ranked 9^th on our recent list of 10 Best Climate Change Stocks to Buy Now.

Shoals Technologies Group, Inc. (NASDAQ:SHLS) delivered Q4 2024 revenue of $107 million at the high end of their expected range, with strong bookings of $145 million resulting in total backlog and awarded orders of $635 million and a book-to-bill ratio of 1.4. However, the adjusted gross profit percentage was softer than expected at 37.6% due to the competitive environment and product mix, though this was partially offset by productivity improvements. For the full year 2024, revenue totaled $399 million, representing an 18.4% decline from 2023, primarily driven by widespread project delays in the industry. Despite the short-term slowdown, SHLS delivered a strong 25.50% revenue CAGR in the last 5 years, which makes it one of the best penny stocks on our list.

Looking ahead to 2025, Shoals Technologies Group, Inc. (NASDAQ:SHLS) expects revenue to be in the range of $410 million to $450 million, with adjusted EBITDA between $100 million and $115 million. The company has made significant progress in diversifying its customer base, with more than 10% of 2024 revenue coming from customers who purchased less than $1 million combined in 2023. Additionally, SHLS has expanded internationally, securing over $8 million of new projects in Q4, including Australia and Chile, and ended the year with approximately $86 million of international backlog and awarded orders. The company remains focused on protecting its core business while expanding into new markets and developing innovative products for high-growth applications.