Aug 27, 2010 10:04 AM PDT
If you're of the mindset that stocks priced in pennies should be avoided simply on principle, you may want to rethink your stance - that mentality has not been accurate for quite some time. Below are a handful of sub-$1.00 stocks of companies that are not only profitable now, but look like they'll remain profitable for a while.
Here's a quick glance at these company fundamentals. Notice the low P/Es, the high margins, and the strong return on equity. There are some large companies - a lot of them actually - that would drool if they could produce those same kinds of results.
| Company | Ticker | Current Price | P/E (12 Mo.) | P/S (12 Mo.) | Net Margin (12 Mo.) | ROE |
| Broadview Inst. Inc | BVII | $0.9800 | 6.5 | 0.69 | 12.1% | 30.3% |
| Sino Clean Energy Inc. | SCLX | $0.2000 | 6.2 | 1.4 | 24.3% | 19.7% |
| China YCT Intl. Group Inc. | CYIG | $1.0000 | 4.1 | 1.05 | 29.0% | 71.4% |
| Spongetech Delivery Systems Inc. | SPNG | $0.0229 | 2.1 | 1.31 | 20.0% | 52.5% |
| L&L International Holdings, Inc. | LLFH | $0.9900 | 2.7 | 0.52 | 34.5% | 45.3% |
What's even more stunning than the strong fundamental snapshot is that the corresponding stocks really haven't been performing all that well. That's not a bad thing - it's just evidence of the reality that stocks don't always trade at what they're worth.
However, in at least a couple of these cases we think the depressed stock price is a temporary situation. Eventually, the company's results should shine through in the form of a gain in the stock. Much faith is required to take that plunge, but the rewards can be worth it.
Here's a closer look at each company; a chart can be accessed by clicking on the bold company name/ticker header.
It's not wildly surprising that a for-profit education penny stock is doing well right now. Lots of people unfortunately are laid off and/or under-qualified, so back to school they go. The edge that Broadview offers compared to its competition is that its focus is on trades and skills rather than degrees and diplomas. The former is more valuable right now. The risk here is the possibility that an economic recovery could pull people out of the classroom and back into the workforce. Can a small player like Broadview survive that?
It's not likely that Sino Clean Energy can sustain its growth pace - revenue increased 392% over the last twelve months; net income improved by 195%. However, we do think it's possible that those newly-achieved figures can be met and impressively enhanced in the near and distant future. The clean energy paradigm shift - in Asia particularly - is a booming business that's going to intensify before subsiding. This penny stock is really off the American radar. We've seen a lot of bullish volume in the past few days though, which hints that the buyers have finally started to wade in.
China YCT Intl. Group Inc. (CYIG)
This Chinese pharmaceutical manufacturer was brought to life in early 2008, and has been consistently profitable ever since. The fundamental numbers above weren't a fluke, nor were they the result of a highly-beneficial accounting 'opinion'. China YCT is as good as it looks on paper. At $1.00, this penny stock is trading at about 20% of its December value, though nothing has changed about the company's results. The stock has perked up lately, and may be hinting at an upside move.
SpongeTech Delivery Systems Inc. (SPNG)
This is the SmallCapNetwork's first encounter with specialty/cleaning sponge maker SpongeTech, and we're not a bit surprised to see the company on our penny stock list. We started following the company in late 2007, and they've done everything they said they would do (and more) in terms of results. The stock never got a break though, until recently. Can it build on its success now that the losing streak has been broken? It deserves to. We estimate this penny stock should be worth about 20 cents based on the company's current performance.
L&L Intl. Holdings Inc. (LLFH)
The stock is classified as a Seattle-based machinery company, but it could just as accurately be considered a Chinese coal company. As we mentioned with Sino Clean Energy, there's a paradigm shift in China that mandates cleaner electricity production, but that's not exclusive of coal. In fact, it's inclusive of coal.... as long as it's burned efficiently and cleanly (which the country has figured out how to do). So, coal is actually seeing growing demand in the region. When/if the global economy picks up steam again, the use of coal will not only be tolerable, but quite necessary.
There you go - five profitable companies with stocks priced under $1.00. It's a relatively diversified group too, not just in terms of geography, but also by industry. These tickers aren't the only profitable penny stocks out there though.
Just making a point.
