In this article, we will look at the 8 High Growth Penny Stocks That Are Profitable in 2024.
Do Small Cap Stocks Offer More Value?
Many investors and analysts are concerned regarding the valuations of large-cap stocks and there is a growing concern that maybe the turn is coming for small and mid-cap stocks.
Brent Schutte, Chief Investment Officer of Northwestern Mutual Wealth Management Company joined CNBC to discuss how small caps offer more value. Schutte mentioned the 1999 and 2000 markets which were very similar to the current market. During that time the market became very narrow, he thinks that the current market is barely holding up. To explain his point he mentioned the manufacturing market and the lower and middle income consumers have been harmed by the interest rate hike over the past years. Schutte does not see the Fed being able to alleviate the suffering market and what consumers have been through and believes that how the economy will perform in the future remains an unanswered question.
For investors who are more interested in returns over a 3 to 5-year period, small-cap stocks regardless of a soft landing or not, offer value as these stocks are priced for recessions. On days when interest rates rise, large cap stocks, particularly those in the S&P 500, tend to perform better while small-cap stocks often decline. However, Schutte argued that there is a debate about how much of the current economic situation is already reflected in stock prices. He thinks optimism is a contrarian indicator, meaning when many believe stocks will rise, it could signal a downturn. He suggests that as investors the strategy of investment should be towards undervalued stocks where optimism is low, suggesting that this approach may yield better returns as conditions change and currently small caps are undervalued indicating better returns.
On the other hand, Tom Lee, managing partner and head of research at Fundstrat Global Advisors, who has been backing up the small-cap bull case thesis, thinks that there is a lot of firepower supporting stocks post-elections.
He recently joined CNBC in another interview expressing his caution before the election period but optimism as soon as the new president takes charge. He noted that many investors are sitting on the sidelines until they have clarity on the presidential outcome and mentioned that he advises his clients to buy the dip as he expects potential market recovery post-election.
Lee believes that once the election is behind us, there is significant “firepower” supporting stocks. He expects a decent rally, with a target for the S&P 500 around 6,000. He thinks this because of a dovish Federal Reserve and a healthy economy. Unlike Schutte, Lee does not foresee a recession in the near term. He however does acknowledge concerns about stock valuations being stretched, particularly with the S&P 500 trading above its historical average. He argued that this is misleading due to the higher multiples of top-performing stocks.
Lee has been bullish on small-cap stocks, we have covered his bullish sentiment in 8 Most Undervalued Penny Stocks To Buy According To Analysts. Here’s a piece from the article:
“To talk about what the stock market looks like today and in the near future. Tom Lee, co-founder of Fundstrat Global Advisors joined CNBC in a recent interview. He has been one of the strong proponents and supporters of small-cap stocks. Lee says that we are in a volatile environment currently, due to a few reasons, one being the elections in less than 30 days, the second being the Middle Eastern crisis which is scaring investors, and lastly the port strike that has the potential to cripple the economy. However, he still expressed his optimism that the year-end has a lot of tailwinds and investors shouldn’t be afraid to buy the dip. Moreover, Lee also highlighted that these current events are all short-term headwinds in a buying cycle and are expected to die down quickly.
Lee thinks that bottoms are tough and processed, and small caps are in the process of what could be a multi-year bottom. Therefore the conviction is that some people might want to buy the big names on NASDAQ and the AI market, however, with small caps trading at lower multiples of P/E less than 10, the risk and reward lie in small caps. Lee further mentioned that interest rate cuts and better earnings growth make the path for small-cap growth more visible.
Tom Lee has also reaffirmed his belief that the S&P 500 could close above 5,700 by year-end, supported by strong economic fundamentals and a dovish Federal Reserve beginning to cut interest rates. He noted that significant cash reserves are available for investment, which could drive stock prices higher in the next three to twelve months.”
With that let’s look at the 8 high growth penny stocks that are profitable in 2024.
A business owner tallying their profits in the back office of a local banking branch.
Our Methodology
To get the list of 8 high growth penny stocks that are profitable in 2024 we relied on the Finviz stock screener, Yahoo Finance, and Seeking Alpha. Using the screener we got a consolidated list of stocks which are trading below the share price of $5 with positive forward P/E, and more than 8% sales growth during the past 5 years. For this aggregated list we sourced the 5-year net income growth and revenue growth rates from Seeking Alpha and the GAAP trailing twelve-month net income from Yahoo Finance. Lastly, we ranked our stocks based on the number of hedge fund holders as per Insider Monkey’s Q2 2024 database. Please note that the share prices were recorded on October 12 and that the list is ranked in ascending order of the number of hedge fund holders.
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).
8 High Growth Penny Stocks That Are Profitable in 2024
8. Flexible Solutions International, Inc. (NYSE:FSI)
Share Price: $3.59
5-Year Net Income Growth: 34.86%
5-Year Revenue Growth: 8.91%
TTM Net Income: $2.83 Million
Number of Hedge Fund Holders: 1
Flexible Solutions International, Inc. (NYSE:FSI) is an international company that specializes in manufacturing and marketing biodegradable polymers and specialty chemicals aimed at water conservation. It operates through two main business segments namely Energy and Water Conservation Products (EWCP) and Biodegradable Polymers (TPAs).
The EWCP segment engages in developing and selling specialty ingredients that help reduce water evaporation to conserve energy and water. They also make pool blankets that inhibit evaporation from reservoirs, swimming pools, and other agriculture-related water storages.
Moreover, the TPAs are thermal poly aspartate used in various industries, including oilfields, agriculture, and cleaning products to prevent corrosion, enhance fertilizer uptake, and help scaling in water piping. Two of its notable products include HEATSAVR and WATERSAVR.
Flexible Solutions International, Inc. (NYSE:FSI) has been facing challenges including tariffs on Chinese imports and high shipping costs, however, it remains optimistic about a profitable year ahead. During the second quarter of 2024 despite the challenges management was able to improve the sales by 2% year-over-year to reach $10.53 million. Moreover, the company’s profits were also significantly high from $810,000 in the comparable quarter last year to $1.29 million in 2024.
The revenue and profitability growth was on the back of strong performance by its NanoChem division which deals with both EWCP and TPAs, accounting for more than 70% of the overall revenue.
Management remains confident for a profitable year ahead as it believes its NanoChem division is yet to reach its full potential with 5 products in the pipeline awaiting purchase orders. If we look at the 5-year performance, Flexible Solutions International, Inc. (NYSE:FSI) has grown its top line by around 9% and bottom line by more than 34% indicating the company has strong fundamentals. It is one of the high-growth penny stocks that are profitable in 2024.
7. Sono-Tek Corporation (NASDAQ:SOTK)
Share Price: $4.14
5-Year Net Income Growth: 59.72%
5-Year Revenue Growth: 12.49%
TTM Net Income: $1.72 Million
Number of Hedge Fund Holders: 2
Sono-Tek Corporation (NASDAQ:SOTK) is a technology company specializing in ultrasonic coating systems. The technology applies a very thin layer of coating on parts in various industries. The coating system is being used in microelectronics, alternative energy equipment, medical devices, and advanced industrial manufacturing.
It ranks as the 7th high-growth penny stock that is profitable in 2024. We say this because, over the past 5 years, the company has grown its top line by 12% and bottom line by 60%, with a trailing twelve-month net income of $1.72 million.
If we look at the first quarter results for fiscal 2025, Sono-Tek Corporation (NASDAQ:SOTK) is still moving higher in terms of revenue and profitability. Net sales for the quarter were up 40% year-over-year at $5.03 million. Whereas, gross profits also increased 38% during the same time to reach $2.45 million.
The company’s use cases in high-growth industries are leading to its performance. The most recent quarter was driven by increased orders from green systems energy, medical technology, and semiconductor markets. As a result, management has been able to maintain a healthy order backlog, which as of May 2024 stood at $7.83 million, more than the full quarter sales.
Sono-Tek Corporation (NASDAQ:SOTK) continues to expect improvement in sales. For the upcoming quarter, management expects 2% to 5% more sales from the FQ1 2025, with improved margins.
Here is what Long Cast Advisers has to say about Sono-Tek Corporation (NASDAQ:SOTK) in its Q3 2023 investor letter:
“Sono-Tek Corporation (NASDAQ:SOTK) is another company expanding its footprint and backlog. I last wrote about this in 4Q21. The Milton, NY based company historically made specialty nozzles for depositing specific and measured amounts of liquified materials. Over the last decade it has transitioned from just manufacturing nozzles for OEM’s to now designing, manufacturing and selling the units themselves. Two of their recent innovations are a roll to roll continuous system for fabric coating and a continuous glass coating system that is more precise and efficient than existing solutions on the market.
The company owns the industrial park from which it operates and over the last few years as tenant leases have lapsed, it has taken over more of its space for manufacturing. With year-end backlog at record highs, additional capacity and easy comparisons, significant growth in ’24 seems likely.
A near term opportunity, towards which there is some visibility, is customers going “from the lab to the production” i.e. they used SOTK equipment “in the lab” and now need larger higher priced units to produce at scale. I believe one can observe an example of this in process. Here’s a video from a start- up using SOTK equipment in the lab (the logo is covered in tape) and here’s a photo from an article about that company in Fast Company with a larger piece of SOTK equipment in the background (their equipment sprays on the materials to form a catalyst that looks like a large bike tire repair patch).
The long term opportunity, which in my view could yield multiples greater return, could occur if SOTK’s spray deposition can replace some portion for the large market for higher cost batch process vacuum deposition. I believe that the company is pursuing R&D and / or license deals pursing this opportunity. In the meantime, without regard for any unknowable future, you have a profitable company funding its own growth, operating with a healthy balance sheet and patiently developing solutions around a core skillset. These are the kinds of things that favorably tilt the odds towards long term value creation.”
6. Kolibri Global Energy Inc. (NASDAQ:KGEI)
Share Price: $3.44
5-Year Net Income Growth: 16.84%
5-Year Revenue Growth: 20.72%
TTM Net Income: $14.52 Million
Number of Hedge Fund Holders: 3
Kolibri Global Energy Inc. (NASDAQ:KGEI) is a North American energy company that focuses on the exploration and extraction of oil and gas. The company owns and operates several properties in the United States, which are used to develop energy products. As per management, the company has around 32.4 million Barrels of Oil Equivalent in proven reserves, with around 58 proved locations still under development.
The company recently announced that it has completed the drilling of the first three 1.5-mile lateral wells in its Tishomingo field. This was significant because management was able to complete the drilling within the budget and in much less time than originally anticipated. The drilling was anticipated to be completed in 20 days, however, management pulled it off in only 14 days, indicating operational efficiency. The wells will start contributing in the fourth quarter thereby increasing the cash flow for Kolibri Global Energy Inc. (NASDAQ:KGEI).
The second quarter results for 2024 were also motivating for investors. The average production for the quarter improved by 30% year-over-year, with adjusted EBITDA also going up by 31% during the same time. The company has also been experiencing a significant tailwind from increased oil prices which are up around 7%. Increased prices topped with increased production, and forecasted production increase from recent drilling makes up a strong investment case for Kolibri Global Energy Inc. (NASDAQ:KGEI).
5. Paysign, Inc. (NASDAQ:PAYS)
Share Price: $3.61
5-Year Net Income Growth: 13.78%
5-Year Revenue Growth: 12.94%
TTM Net Income: $7.73 Million
Number of Hedge Fund Holders: 6
Paysign, Inc. (NASDAQ:PAYS) is an international financial services company that provides payment processing solutions and prepaid card products for various industries. The company caters to corporate companies, Healthcare providers, and Government organizations providing them with payroll cards that can be used as debit cards or health benefit cards.
It has incorporated technology into its services to ensure that payment systems are easily connected with other businesses. It is also currently managing payment programs for 6 large pharmaceutical companies around the globe.
Financially speaking, Paysign, Inc. (NASDAQ:PAYS) has done well in maintaining a good revenue stream and growing its net income. During the past 5 years, it has grown its top line by 13% and bottom line by 14% making it one of the high-growth stocks that are profitable in 2024.
The second quarter of 2024 witnessed some key financial achievements. The company’s Patient Affordability business drove the success by improving around 267% in revenue year-over-year. As a result, the overall revenue of the company improved nearly 30% from the comparable quarter last year and 8.7% subsequently.
Paysign, Inc. (NASDAQ:PAYS) processed 365% more claims during the quarter year-over-year indicating that more companies are using its payment services and cards. Management expects margins to continue to expand as its Patient Affordability business dominates the growth.
4. Crexendo, Inc. (NASDAQ:CXDO)
Share Price: $5.00
5-Year Net Income Growth: 49.76%
5-Year Revenue Growth: 33.93%
TTM Net Income: $2.79 Million
Number of Hedge Fund Holders: 7
Crexendo, Inc. (NASDAQ:CXDO) is a technology company specializing in cloud communication services. They help businesses manage their communications more effectively via the Internet through VoIP technology. Their services include voicemail, call forwarding, and conference calling, which can be essential for businesses of all sizes.
Their software solution makes it easier for businesses to manage communications through a single AI-based platform and has scalability features that allow businesses to change the platform as per the requirement.
The second quarter of 2024, marked the fourth consecutive quarter of GAAP profitability indicating a strong growth trajectory for the company. Revenue for the quarter was $14.7 million up 16% year-over-year and net income was up more than 220% during the same time.
The software solutions of Crexendo, Inc. (NASDAQ:CXDO) were the major contributors to growth. The consolidated software revenue was up more than 35% year-over-year. Looking ahead the growth trajectory looks impressive with a backlog that has grown 39% over the year. Management has invested in Oracle cloud infrastructure and NetSuite to support future growth and has plans to expand to Europe.
It is one of the high-growth penny stocks that are profitable in 2024.
3. Ring Energy, Inc. (NYSE:REI)
Share Price: $1.65
5-Year Net Income Growth: 38.04%
5-Year Revenue Growth: 20.39%
TTM Net Income: $71.29 Million
Number of Hedge Fund Holders: 11
Ring Energy, Inc. (NYSE:REI) plays a vital role in bringing energy resources to market through exploration and production in some of the oil richest areas of the United States. The company controls around 96,127 acres of land in the Permian Basin and has interests in approximately 1,043 producing wells. The reserves they hold are mainly oil-based with around 63% of reserves having oil. The company has around 129.8 million barrels of oil equivalent in proved reserves making them a significant energy contributor in the country.
Since 2018, Ring Energy, Inc. (NYSE:REI) has grown its production at a compound annual growth rate of 22%. Moreover, management has been successfully acquiring new wells thereby adding more cash flow streams to its portfolio. During the second quarter of 2024, it produced and sold 13,623 Bo/d which was up from 11,86 Bo/d in Q2 2023. Overall, sales of natural gas and oil were also up from 17,271 Boe/d in Q2 2023 to 19,786 Boe/d in the most recent quarter. Oil comprised around 69% of the total sales.
Management has been successful in reducing the operating cost over the year from $22.61 per Boe to $22.09 per Boe, thereby adding more adjusted free cash flow to its books. The adjusted free cash flow for the quarter came in at $21.4 million up more than 70% year-over-year.
Ring Energy, Inc. (NYSE:REI) was held by 11 hedge funds in Q2 2024 and has maintained a healthy net income growth rate of 38% over the past 5 years making it one of the high-growth penny stocks that are profitable in 2024.
2. Safe Bulkers, Inc. (NYSE:SB)
Share Price: $4.72
5-Year Net Income Growth: 30.91%
5-Year Revenue Growth: 9.35%
TTM Net Income: $87.55 Million
Number of Hedge Fund Holders: 15
Safe Bulkers, Inc. (NYSE:SB) focuses on owning and operating ships designed to transport bulk materials across oceans. It owns a fleet of dry bulk vessels specifically designed to carry large quantities of goods. The company mainly engages in the transportation of unpackaged goods including coal, grain, and iron ore, which are essential raw materials for various industries.
As of early 2024, Safe Bulkers, Inc. (NYSE:SB) operated around 47 vessels of different sizes ranging from Panamax, medium-sized ships that can pass through the Panama Canal to Capesize, huge ships that must sail around the Cape of Good Hope or Cape Horn due to their size. Its vessels sail around the world making it an important trading partner for many international companies.
Safe Bulkers, Inc. (NYSE:SB) is emphasizing on the importance of decarbonization efforts and is trying to improve the energy efficiency of its vessels; these efforts are expected to make them dominate the market in the medium term. As per the management, the commodities the company transports are in high demand including coal, grain, and iron ore meaning the growth prospects of its business remain bright. Moreover, according to BIMCO, the global dry bulk market is expected to grow by 3% in 2024 and management believes they are well positioned to capitalize on this growing demand.
As far as its decarbonization efforts are concerned the company has achieved a 7.4% reduction in fleet emissions and is well-positioned to compete in the environmentally-focused charter market. Moreover, it has maintained a strong financial structure, with significant liquidity and a backlog of approximately $250 million. During the most recent quarter, Q2 2024, it grew its revenue by more than 11% and net income by more than 79% year-over-year, indicating robust financial performance.
Safe Bulkers, Inc. (NYSE:SB) ranks as the 2nd high-growth penny stock that is profitable in 2024.
1. Kosmos Energy Ltd. (NYSE:KOS)
Share Price: $4.48
5-Year Net Income Growth: 61.60%
5-Year Revenue Growth: 8.88%
TTM Net Income: $258.32 Million
Number of Hedge Fund Holders: 25
Kosmos Energy Ltd. (NYSE:KOS) is an independent oil and gas company that specializes in exploring and producing energy resources from deepwater locations, primarily along the Atlantic Ocean’s margins. It operates in mainly four geographical regions including Ghana, Equatorial Guinea, Mauritania/Senegal, and the U.S. Gulf of Mexico.
The oil and gas exploration company is making significant progress toward its production goals, with recent successful projects contributing to its output. The company has successfully started oil production at the Jubilee Southeast and Winterfell projects, alongside enhancement efforts in the Gulf of Mexico. By the end of the year, it anticipates contributions from the GTA project and infill drilling in Equatorial Guinea, aiming for a year-end production target of around 90,000 barrels of oil equivalent per day.
One of the key differentiating factors for Kosmos Energy Ltd. (NYSE:KOS) is its focus on quality over quantity. This approach follows a multi-year investment cycle, with capital expenditures expected to decrease as projects are completed. It expects to generate significant free cash flow once all the projects are operational. Management expects its cash flow to be between $100 million and $150 million per quarter. This cash flow will primarily be used to pay down debt, enhancing financial stability.
During the second quarter of 2024, the company reported production of 62,000 barrels of oil equivalent per day, marking a 7% increase year-on-year. This was, however, towards the lower end of its guidance due to reduced output from the Jubilee field and delays in the Winterfell project startup.
However, on the bright side, the cost of production was well within its guidance, and operating expenses were below expectations indicating operational efficiency. Kosmos Energy Ltd. (NYSE:KOS) now expects to produce around 67,000 to 71,000 barrels per day, a slight adjustment due to the challenges from Jubilee and Winterfell locations.
These challenges are short-term headwinds as the company has established fundamentals demonstrated by its 5-year performance. Over the past 5 years, its top line has grown by 9% and the bottom line has improved by more than 61%, thereby making it one of the high-growth penny stocks that are profitable in 2024.
Patient Capital Management made the following comment about Kosmos Energy Ltd. (NYSE:KOS) in its Q3 2023 investor letter:
“We added to our energy exposure in the quarter, buying shares in Kosmos Energy Ltd. (NYSE:KOS), an exploration and production services company with assets in Africa. The company is differentiated in the exploration & production (E&P) space because of its growth profile (+30% YoY in 2024), long reserve life (>20yrs, nearly double the sector average) and focus on liquified natural gas (LNG). We see this as a classic case of time arbitrage where the market is myopically focused on the near-term risk the company will miss production targets for new assets while ignoring the long-term intrinsic value. After years of investing in project development, it is close to moving into the harvesting phase with production expected to grow 30% YoY in 2024. At the same time, capital expenditures should fall 30% YoY leading to very strong FCF yield of >25%, which will initially go towards debt paydown. At these levels, the company will generate more than its current market cap in FCF over the next 5 years at $90 Brent prices. With the combination of gas-heavy reserves and inflecting cash flow generation, we think Kosmos is significantly undervalued and a potential acquisition target.”
While we acknowledge the potential of Kosmos Energy Ltd. (NYSE:KOS) to grow, 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 a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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