The Three Top Companies Trading Below $5

Written by: Aditya Raghunath

Low-priced stocks are attractive to investors as they can purchase a substantial number of shares with relatively less capital. While the broader markets have staged a rebound there are plenty of low-priced stocks to place your bets on right now. Here we look at three such penny stocks that can offer significant upside to the high-risk investor.

A hotel aggregator

The travel and hospitality industry has been among the worst hit in the COVID-19 pandemic. Shares of hotel aggregator, Trivago (NASDAQ: TRVG) are trading at $1.7 which is 68% below its 52-week high. Further, there are rising concerns over a recession impacting the global economy, that will continue to hurt companies in the hospitality sector.

However, the recent pullback in stock prices have also made Trivago’s valuation attractive to contrarian investors. The stock trading at 0.8x times its book value with a price to 2021 sales multiple of 0.9x.

Trivago stock has grossly underperformed the broader markets in the last few years. Its revenue has fallen $1.24 billion in 2017 to $838 million in 2019 and is forecast to reach $393 million in 2020. Despite this massive fall in sales, Trivago has focused on financial discipline and increased free cash flow by a healthy 60% since 2017.

Travel giant Expedia (NASDAQ: EXPE) has a 20% stake in Trivago and this backing will help the latter tide over these difficult times. Trivago is debt free and its clean balance sheet makes it a top bet especially if travel demand picks up.

A software pivot

The second penny stock on our list is BlackBerry (NYSE: BB), now an enterprise facing software and services company. BlackBerry exit the smartphone space a few years back and has pivoted to provide solutions in the IoT, 5G network security, connected car and related segments.

BlackBerry is bullish on its expertise in the connected car vertical that is expected to rake in sales over the next decade, given the development in autonomous vehicles. The former mobile manufacturing giant is also banking on its acquisition of Cylance to drive top-line growth and leverage the latter’s artificial intelligence and machine learning capabilities.

BlackBerry stock is trading at $4.8 which is well below its record high of $140, a price it touched when it led the mobile market. However, the company has completely transformed itself and investors will be hoping for a turnaround sooner rather than later.

A cannabis player

Another penny stock to watch out for is Auxly Cannabis (OTC: CBWTF). The cannabis industry is still at a nascent stage and is expected to grow at a rapid pace in the upcoming decade. There is tremendous potential in the recreational and medical marijuana markets given that governments are legalizing these products.

Auxly Cannabis stock is trading at $0.20 and it valued at a market cap of over $100 million. Auxly has managed to assemble a robust portfolio of assets and capabilities across the cannabis value chain. It is one of the first movers in the edibles space and has a diversified supply of raw materials, that will help it create quality products in an expanding global market. In the first quarter, Auxly reported net revenue of $9.9 million, an increase of 1,100% year-over-year.

The verdict

While the above penny stocks carry significant risks, investors can generate multi-fold returns, sometimes in a matter of a few months.

You can also take a look at Finscreener.com’s recently launched Penny Stock Screener that allows subscribers to identify micro-cap stocks and generate outsized gains. This screener shows the top 20 micro-cap companies traded on the U.S. exchange and are ranked in terms of their 3-month performance.

Related: Digital Advertising Industry and its Correlation to Economic Growth

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