In this article, we will look at the 7 Penny Stocks with Low PE Ratios.
The US economy has evaded the risk of a recession. Instead, it is tilting towards a soft landing. Larry Adam, chief investment officer at Raymond James, recently appeared in a CNBC interview and is of the opinion that the current market is precisely what a soft landing looks like. Talking about how lower interest rates are expected to benefit small caps, in particular the Russell 2000, Adam said that he believes the bull market will continue with the economy inching closer to a soft landing.
Small cap stocks get around 56% of their financing from the short end of the curve, which refers to the short-term interest rate on the yield curve. This typically represents the yields on bonds with shorter maturities, such as 2-year or 5-year Treasury notes. The large-cap companies, in contrast, get only 26% of their financing from these short ends of the curve. Therefore, Adam concludes that as the Fed continues to lower interest rates, small cap companies will be better positioned to meet their financing needs.
He pointed out that the Fed is expected to cut rates twice in 2024 and another four times in 2025, painting a favorable picture for small caps. He iterated that the impact of the rate cuts has been positive for small caps, which have outperformed large caps. Taking this into a historical context, whenever the economy goes towards a soft landing, the circumstances help the small caps more significantly than the rest of the market.
Future Outlook for Small Caps
In one of our recent articles on the 8 Hot Penny Stocks To Invest In According to Hedge Funds, we discussed whether small caps are expected to rally in the coming days. Here is an excerpt from the article:
The US economy has successfully evaded the chances of a recession. The expected performance of small caps in a slowing economy has thus become an important discussion. Nancy Prial, Co-CEO & Senior Portfolio Manager at Essex Investment Management, recently joined CNBC for an interview to talk about the expected performance of small cap stocks in an economy going towards a soft landing. Prial believes this is the beginning of a multi-year bull cycle for small cap stocks. Her claim is based on certain underlying reasons, including small caps being significantly under-owned at present. In fact, they are standing at record lows as a percentage of the total equity market.
In addition, the valuations of small caps are substantially attractive, and are considerably below their large cap counterparts in the S&P 500. The relative earnings growth for small cap stocks is another significant factor. With the earnings growth of small cap stocks expanding. Prial expects small cap stocks to be growing faster than their large-cap counterparts by the end of the year. She thinks that the Federal Reserve interest rate cuts and the confidence that the economy is moving towards a soft landing were what we really needed to turn the situation around.
The S&P 500 EPS growth rate estimates show that the market is anticipated to experience more than a 13% year-over-yearyear-over-year growth in Q4 and more than 15% in the coming year. Since Prial mentioned that small caps are likely to outperform large caps in terms of growth in the coming future, she clarified that the overall indices might not be able to perform above the 15% threshold. Investors thus need to be good stock pickers to capitalize on the earnings growth trend, as she believes in a number of small cap stocks experiencing a 15% to 20% growth in the coming year.
Tom Lee, Head of Research at Fundstrat Global Advisors, expressed a similar bullish sentiment, saying that he expects a considerable rally in small-cap stocks as the rate cut cycle begins. He thinks that the recent volatility in small cap stocks is part of a multi-year bottoming process, propelled by investor expectations and economic data.
Small caps which typically trade at discounted valuations offer considerably better earnings growth prospects than mega-cap growth stocks. The easing of monetary policy and strengthening fundamentals thus make small caps an attractive buy for Lee, even with the unpredictability surrounding near-term volatility.
With these positive trends for small cap stocks in view, let’s look at the 7 penny stocks with low PE ratios.
7 Penny Stocks with Low PE Ratios
Our Methodology
We used the Finviz stock screener and Yahoo! Finance to make a list of 15 penny stocks with forward P/E ratios less than 10 and positive EPS growth this year as of October 7. We then sourced their hedge fund sentiment from Insider Monkey’s database, and arranged the stocks in ascending order of their number of hedge fund holders, as of Q2 2024.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Penny Stocks with Low PE Ratios
7. HeartCore Enterprises, Inc. (NASDAQ:HTCR)
Share Price: $0.75
Forward P/E: 2.78
EPS Growth This Year: 219.00%
Number of Hedge Fund Holders: 2
HeartCore Enterprises (NASDAQ:HTCR) is a software development company based in Japan. It operates through two business units: the Customer Experience Management (CXM) Platform and the Digital Transformation Platform. The CXM Platform covers sales, marketing, service, and content management systems along with other tools that allow companies to attract and engage customers throughout the customer experience.
The Digital Transformation business provides customers with task mining, process mining, and robotics process automation to accelerate the digital transformation of enterprises. HeartCore has an ongoing technology innovation team that develops software to support the needs of large enterprise customers.
The company is continually growing its core business, undergoing a 20% organic growth in its software division in Q2 2024. It also formed key partnerships, including collaborations with INCUDATA Corp and Hitachi Systems Ltd. These collaborations are expected to boost the company’s strength in customer retention and digital marketing strategies. It also launched its Artificial Intelligence Software Development Division, paving the way for future technological advancements in content marketing solutions and AI.
HeartCore Enterprises’ (NASDAQ:HTCR) quarterly revenue for Q2 was $4.1 million, down from $5.1 million last year. The depreciation of the yen was the primary factor behind this fall. However, the company is resilient, and its $3.8 million in cash reserves highlights that. Operating expenses also reduced to $2.3 million in Q2 2024, compared to last year’s $3.0 million. This improvement was attributed to lower administrative costs.
The company’s overall long-term outlook remains bullish due to its expanding Go IPO business. This business is expected to contribute substantially to the company’s performance in the second half of 2024, with several IPO clients slated to go public by year-end. Strengthened by a promising IPO pipeline and robust partnerships, the company is expected to undergo a 30% organic growth in 2024. It ranks seventh on our list of the 7 penny stocks with low P/E ratios.
6. Generation Income Properties, Inc. (NASDAQ:GIPR)
Share Price: $2.03
Forward P/E: 1.75
EPS Growth This Year: 14.30%
Number of Hedge Fund Holders: 2
Generation Income Properties (NASDAQ:GIPR) is an internally managed real estate investment trust that focuses on managing and acquiring income-producing office, retail, and industrial properties net leased to high-quality tenants in US markets. Its retail, office, medical retail, and industrial properties are located in a number of states. The company also has several subsidiaries, including Generation Income Properties, GIPVB SPE LLC, GIP DB SPE LLC, GIPVA 2510 WALMER AVE LLC, GIPNC 201 Etheridge Road LLC, and others.
The company has a strong portfolio and is stable in its operations. Its total revenue from operations during the three and six months ending June 30, 2024, stood at $2.3 million and $4.7 million, respectively. These numbers were up from $1.3 million and $2.7 million for the three and six months ending June 30, 2023, respectively. This revenue increase was driven by the integration of the 13 property portfolio that the company acquired from Modiv in August 2023.
It also signed a lease with Auburn University at an industrial building in Huntsville, AL. Its management is continually receiving indicative terms that prove favorable to the company. It currently holds 100% rent collection from its leased properties, and received $2.5 million in cash for its Limited Partnership from a new investor. Generation Income Properties (NASDAQ:GIPR) extended the redemption date for membership interests of its equity partnership in two of its Norfolk, Virginia properties to February 2027 from February 2025.
Its future goals are to provide long-term growth to its investors and pay a 100% covered dividend. Thus, it is undertaking efforts to reach these goals in as little time frame as possible, closely monitoring the dislocated market. Pricing for the assets in the company’s target is tilting in its favor, which is proving beneficial to everyone related to the company. It ranks sixth on our list of the 7 penny stocks with low P/E ratios.
5. CBAK Energy Technology, Inc. (NASDAQ:CBAK)
Share Price: $1.22
Forward P/E: 3.7
EPS Growth This Year: 1,450.00%
Number of Hedge Fund Holders: 3
CBAK Energy (NASDAQ:CBAK) is an investment holding company based in China that operates in two primary segments: the CBAK segment and the Hitrans segment. The CBAK segment covers the commercialization, manufacture, and distribution of a wide array of standard and customized lithium-ion rechargeable batteries for several applications. The Hitrans segment covers the development and manufacturing of NCM precursor and cathode materials. Its products have multi-industry applications.
CBAK Energy (NASDAQ:CBAK) achieved a 55% increase in its net revenues from its battery business in Q2, touching $80.4 million for the first half of 2024. Net revenues for the company also grew 13% to $47.8 million from $42.4 million in the same period in 2023, primarily due to an increase in revenue from the company’s battery business. One of the primary drivers of growth for the company is its strategic shift towards residential energy solutions and diverse energy storage applications. The company also boasts strong brand loyalty, which gives it a considerable market advantage when coupled with its solid sales momentum.
The company is undertaking efforts to continue the positive trajectory of its battery business. It rolled out plans in June to advance its fast-charging technology with the improved model 32140 battery. This version achieves a full charge in under 35 minutes, substantially expediting the process. The upgrade enables the 32140 large cylindrical battery to shift its original 0.8C fast charging rate to 1.8C fast charging rate, accelerating charging speed by 1.25 times. Its plans included improving the battery’s cycle life under high-current charge and discharge, doubling it to improve its overall durability and efficiency.
4. Dolphin Entertainment, Inc. (NASDAQ:DLPN)
Share Price: $0.66
Forward P/E: 3.67
EPS Growth This Year: 91.70%
Number of Hedge Fund Holders: 3
Dolphin Entertainment (NASDAQ:DLPN) is an independent entertainment production and marketing company that operates through its subsidiaries. These include The Door Marketing Group LLC (The Door), 42West LLC (42West), and Shore Fire Media, Ltd (Shore Fire Media). The company offers publicity and marketing services to brands in the television, film, music, hospitality, and gaming industries.
Dolphin Entertainment’s (NASDAQ:DLPN) operations are divided into two segments: entertainment publicity and marketing and content production. The entertainment publicity and marketing segment provides diversified services, including social media and influencer marketing, strategic communications, entertainment content marketing, public relations, celebrity booking, production of promotional video content, and strategic communications. The content production segment covers Dolphin Films, Inc. and a department within the company that produces, develops, and distributes television content, films, and other digital content.
The company has strong fundamentals in place, with revenue for Q2 coming up to $11.4 million, bringing the total revenue for the first half of 2024 to $26.6 million. It expects to continue this profitability trajectory, improving it even further in the second half and taking revenue for fiscal 2024 ahead of its goal of $50 million. It is aiming for more than 20% year over year growth.
In addition, the company generated a positive adjusted operating income of around $900,000 and is on target to report positive adjusted operating income for all of 2024 and beyond. It is thus entering a phase of financial flexibility.
The company also recently announced the acquisition of Elle Communications, a leading PR agency specializing in social and environmental impact. Elle has joined the company as part of its publicity and marketing group as a division of 42West and will share clients with its other preeminent PR firms, benefitting them all in the process. This acquisition has strengthened Dolphin Entertainment’s (NASDAQ:DLPN) portfolio, positioning it to expand its position through its combined relationships and referrals. The company ranks fourth on our list of the 7 penny stocks with low P/E ratios.
3. Iveda Solutions, Inc. (NASDAQ:IVDA)
Share Price: $1.56
Forward P/E: 0.85
EPS Growth This Year: 30%
Number of Hedge Fund Holders: 3
Iveda Solutions (NASDAQ:IVDA) specializes in digital transformation and artificial intelligence technologies. It offers smart sensors, AI intelligent video search, gateways, Internet of Things platforms, and trackers. The company boasts a wide portfolio of products and technologies, including the Iveda Smart Drones, Cerebro, IvedaAI, Smart Utility Cabinet, IvedaCare, Iveda Smart UVC, Vemo Body Camera, Utilus, IvedaXpress, and more.
IvedaAI runs on deep-learning video analytics software in a computer or server environment. vumastAR is an AI vision software that leverages videos taken from different sources to process and analyze data in real time. These sources include AR glasses, IP cameras, tablets, and androids. In addition, Cerebro is a software technology platform integrating a number of disparate systems for management and central access of subsystems, applications, and devices throughout an entire environment.
The company is expanding and advancing its portfolio by undertaking several new initiatives. It recently announced the launch of LevelNOW, a next-generation tracking and monitoring solution for efficient liquid storage management. LevelNOW specifically targets industrial and commercial organizations, oil and gas companies, and government agencies and officials who manage resource management and environmental compliance. It offers GPS tracking, advanced fluid monitoring, and real-time alerts to increase operational efficiency, provide critical cost saving, and ensure environmental compliance. It received an initial offer of 1,000 LevelNOW units from one of Australia’s leading oil companies.
Iveda Solutions (NASDAQ:IVDA) also entered into an agreement with ColoBarn, a colocation services provider in Arizona and Florida, to boost the physical security of the latter’s data centers. The integration will utilize AI analytics for facial recognition, intrusion detection, license plate recognition, and several other features.
Iveda Solutions (NASDAQ:IVDA) is also applying its AI vision software vumastAR to recognize and respond to oil spills. This technology is being developed for proof-of-concept projects with major oil companies in the US and Australia. This platform’s AI-driven detection and automatic alerts aim to reduce the need for manual checks, resulting in faster detection times and labor savings. Such initiatives are solidifying the company’s position in the market.
2. Oportun Financial Corporation (NASDAQ:OPRT)
Share Price: $2.85
Forward P/E: 6.2
EPS Growth This Year: 113.70%
Number of Hedge Fund Holders: 9
Oportun Financial Corporation (NASDAQ:OPRT) is a fintech company specializing in financial products that assist members in maintaining their financial health. Its product portfolio includes unsecured personal loans, personal loans, secured personal loans, and Set & Save.
Personal loans address pressuring financial needs, personal growth opportunities, and planned purchases. In contrast, secured personal loans allow access to larger loan sizes compared to unsecured loans. This proves critical for members with financial needs that exceed their unsecured lending limits.
Set & Save is a savings product with an intelligent lending and savings platform. This platform helps people access and automate their savings without affecting their ability to meet daily spending needs. It leverages artificial intelligence to automate its customers’ financial health, even those not well served by mainstream financial institutions.
Oportun Financial Corporation (NASDAQ:OPRT) is making considerable progress toward its long-term profitability targets. It either outperformed or performed at the better end of its guidance metrics in continuation of its 2024 business recovery. To increase its focus on our core products, the company signed a non-binding letter of intent to sell its credit portfolio. It expects this to increase its adjusted EBITDA by around $11 million during 2025. Oportun Financial Corporation (NASDAQ:OPRT) also grew its second-quarter adjusted EBITDA by 109% year over year, taking it to $30 million. It was profitable on an adjusted basis for its second consecutive quarter.
In addition, the company’s new lending-as-a-service collaboration with Western Union will increase its brand awareness and application funnel, allowing it to reach millions of customers. Its capital partners have continually demonstrated confidence in the company’s business model and loans. Raising a new $245 million warehouse facility since the end of the quarter is a suitable example. Overall, Oportun Financial Corporation (NASDAQ:OPRT) is positioned to improve its performance in the second half of 2024, primarily with markedly higher adjusted profitability. It ranks second on the list of the top penny stocks with low P/E ratios.
1. Qurate Retail, Inc. (NASDAQ:QRTEA)
Share Price: $0.68
Forward P/E: 1.37
EPS Growth This Year: 108.30%
Number of Hedge Fund Holders: 19
Qurate Retail (NASDAQ:QRTEA) specializes in the video and online commerce industries in Europe, North America, and Asia. It operates a network of subsidiaries, QVC, Inc., which includes HSN, Inc. and Cornerstone Brands, Inc. Qurate Retail (NASDAQ:QRTEA) markets and sells a number of consumer products through merchandise-focused televised shopping programs, mobile applications, and the Internet. It serves various consumers through social pages, multiple streaming services, print catalogs, and in-store destinations.
Formerly known as Liberty Interactive Corporation, Qurate Retail (NASDAQ:QRTEA) operates in three segments: QxH, QVC, and CBI. The QxH segment sells and markets a range of consumer products in the US, typically through televised shopping programs and the Internet (websites and mobile applications). The CBI segment covers a portfolio of aspiration apparel and home brands in the US, selling merchandise through brick-and-mortar locations and the Internet. The QVC International segment sells and markets a range of consumer products in international markets through its televised shopping programs and the Internet through international websites and mobile applications.
The company experienced some macro and top-line pressures recently but managed to expand its gross margin across all of its business units for the fifth consecutive quarter. These gains were boosted by continued product margin and fulfillment improvement from its project Athens initiatives. Qurate Retail (NASDAQ:QRTEA) is also disciplined in cost management, lowering its total company SG&A expenses. This resulted in growth in its total company-adjusted OIBDA growth and adjusted OIBDA margin expansion for the fourth consecutive quarter. The company also boosted profitability in its core video commerce businesses.
Qurate Retail (NASDAQ:QRTEA) focused investment in its Age of Possibility campaign in Q2. It was launched in April, gathering 50 influential and powerful women to be QVC brand ambassadors. This list included businesswomen, celebrities, and activities. The company has received a positive response from this campaign since its launch, earning around 38 billion media impressions, more than a million visits to QVC’s campaign website, around 200% increase in QVC social followers, and a 330,000 increase in its Facebook community members. This success drove strong demand from Age of Possibility-related brands during the quarter.
Overall, QRTEA ranks first among the 7 penny stocks with low P/E ratios. While we acknowledge the potential of penny stocks, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than QRTEA but trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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