Investing in penny stocks is very hard.
Trust me, I know the trouble a person goes through in investing their savings into a penny stock and watching it fade, instead of growing.
However, I think penny stocks can become the Golden Goose. I am sure most of us have heard the story of Goose and the golden eggs as a kid.
So, now you must be thinking about avoiding the first scenario and grabbing the Golden goose?
Well, in my experience investors who lost money in penny stocks went all in without doing a fundamental and technical analysis of the stock.
If you are new to investing and don’t know anything about analysis. Do check my guide on Fundamental analysis and Technical analysis.
If you are not new to investing, well then you must be knowing that investors who earn profit from penny stocks put a lot of hard work into the analysis.
They take decisions only when they are confident of their choices.
What are Penny Stocks? Should You invest in them?
Penny stocks are stocks that have a very low market capitalization. Such stocks are traded at a very low price and have very little volume.
They are usually small-cap companies listed on the Bombay Stock Exchange in India.
Now, a lot of you must be thinking, what are small-cap companies?
Well, in the stock market companies are divided into 3 categories based on their market capitalization which is:
| Large-Cap Companies | Mid-Cap Companies | SmallCap Companies |
| Rs. 20,000 crores or above | Rs. 5,000 – 20,000 crore | Below Rs. 5,000 crore |
The majority of the penny stocks fall in the small-cap category.
Feature of Penny Stocks
Penny stocks are a good investment due to their various features such as :
High – Returns :
- Such stocks provide high – return in a short span of time as compared to stocks of large-cap companies.
- Most Penny stock companies are in the growth phase and if you catch a penny stock at this stage, then the returns will be unbelievable.
- However, penny stocks are quite risky and they react very quickly to market fluctuations
Pocket Friendly:
- Penny stocks are very cheap as compared to growth stocks or dividend stocks in the market.
- Ideally, penny stocks range from Rs 0.01 to Rs 20.
- They are considered to be a good investment as you can buy a large number of penny stocks with very low investments.
- For Example – If the current price of a penny stock is Rs 0.25 Then you can get 1000 penny stock with an investment of only Rs 2,500.
High – Fluctuation:
- Penny stocks are pretty volatile as they have very low volumes.
- This often results in continuous upper Circuits which can result in more profits.
| Pros | Cons |
| Penny stocks can be multi-bagger. They have the potential to replicate your investments tenfold. Penny stocks do not require huge investments. | Penny Stocks have low liquidity as the companies are not very popular. Penny stocks have high chances of fraud and scams. The prices of stocks can be manipulated by using a pump and dump scheme. Penny stocks have low volumes. |
Best Penny Stocks to Invest in India Right Now
I have done a lot of research, technical and fundamental analysis in choosing these penny stocks. In my opinion, the below penny stocks will become multi-bagger in the long run. I still advise you to do your own research and then invest.
1. Brightcom Group Limited
The company is listed on the NSE with a presence in 22 countries globally. It provides digital marketing services to blue-chip companies such as Airtel, Maruti Suzuki, and Lenovo.
The company is in the advertising sector and has a good potential to grow. The company has shown tremendous 12 months growth in the past year and the current market price as of 22nd June 2021 is 16.80.
I believe that it is an undervalued company with a book value of Rs. 59.
The company also have good fundamentals listed below :
| Brightcom Group Limited | ||
| 1 | Current Ratio – 4.42% |  |
| 2 | Debt to Equity Ratio – 1.27% | |
| 3 | Return On Capital Employed – 23.27% | |
| 4 | Shareholding Pattern – Pledges Share – 11.73% | |
| 5 | Inventory Turnover Ratio – Not Applicable | |
| 6 | Free Cash Flow – (47) Crore |  |
| 7 | Reserves and Surplus – 2731 Crores | |
| 8 | P/E Ratio – 2.10 | |
2. Surat Textile Mills
The current price of Surat textile mills as of 22nd June 2021 is 6.93. The company has shown better returns on equity.
It is in the business of manufacturing Polyester Chips and Partially Oriented Yarn. The current market capitalization of the company is only 147 crores making it a small-cap company.
The company is debt-free with a CAGR of 19.39% in the last 5 years making it an ideal investment. The stock is also not in the overbought zone and below are the fundamentals of the company.
| Surat Textile Mills | ||
| 1 | Current Ratio – 35.77 | |
| 2 | Debt to Equity Ratio – Debt Free Company | |
| 3 | Return On Capital Employed – 12.50 | |
| 4 | Shareholding Pattern – Pledges Share – Zero Pledged Shares | |
| 5 | Inventory Turnover Ratio – 11.52 | |
| 6 | Free Cash Flow – 5.24 Crore | |
| 7 | Reserves and Surplus – 115.81 Crores | |
| 8 | P/E Ratio – 13.47 | |
3. Skyline Millars
Skyline Millars Limited was initially a construction company that has now expanded its business into the manufacturing of RCC Pipes and MANHOLE Systems.
The company has also gained success in the development of real-estate and construction equipment.
Skyline is currently trading at an all-time high of Rs 10.44 and the company envisions achieving “long-term value creation for all stakeholders without compromising on integrity“.
The company is debt-free with zero promoters pledged and the stock has shown bullish signals in the long run.
Apart from that the company also have good financials listed below:-
| Skyline Millars | ||
| 1 | Current Ratio – 187.92 | |
| 2 | Debt to Equity Ratio – Debt Free Company | |
| 3 | Return On Capital Employed – 10.49 | |
| 4 | Shareholding Pattern – Pledges Share – Zero Pledged Shares | |
| 5 | Inventory Turnover Ratio – 0.06 | |
| 6 | Free Cash Flow – 3.53 Crore | |
| 7 | Reserves and Surplus – 22.84 Crores | |
| 8 | P/E Ratio – 20.84 | |
4. Pressman Advertising Ltd.
Pressman advertising LTD is engaged in the business of public relations, print media, and selling space for advertising.
The company is debt-free and maintains a healthy dividend payout of 45%. The stock has generated better returns than FD.
It is currently trading at Rs 28.95. It is a good time to consider this stock as it is not in the overbought zone.
Apart from that the company also have good financials listed below:-
| Pressman Advertising Limited | ||
| 1 | Current Ratio – 9.59 | |
| 2 | Debt to Equity Ratio – Debt Free Company | |
| 3 | Return On Capital Employed – 18.61 | |
| 4 | Shareholding Pattern – Pledges Share – Zero Pledges Shares | |
| 5 | Inventory Turnover Ratio – 0 | |
| 6 | Free Cash Flow – 6.56 Crore | |
| 7 | Reserves and Surplus – 38.08 Crores | |
| 8 | P/E Ratio – 11.92 – Less Than Industry P/E | |
5. Trident Ltd
Trident Limited is a leading manufacturer of yarn, Bath Linen, Bed Linen, and wheat straw-based paper, Chemicals, and Captive Power. The company is also in the paper industry.
The company is also maintaining a healthy dividend payout of 50%. It is a debt-free company with zero promoters pledged.
It is currently trading at Rs 16.70. It is a good time to consider this stock as it is not in the overbought zone.
The company also have good fundamentals listed below :
| Trident Limited | ||
| 1 | Current Ratio – 0.99% | |
| 2 | Debt to Equity Ratio – 0.46% | |
| 3 | Return On Capital Employed – 10.20% | |
| 4 | Shareholding Pattern – Pledges Share – 11.73% | |
| 5 | Inventory Turnover Ratio – 2.08 | |
| 6 | Free Cash Flow – 175.03 Crore | |
| 7 | Reserves and Surplus – 2818 Crores | |
| 8 | P/E Ratio – 25.22 | |
6. Medi Caps Ltd
Medi Caps limited is a pharmaceutical organisation.It manufactures allopathic pharmaceutical.
The company has the lowest PE ratio of 5.28 compared to its peers like Cipla, Dr. Reddy and Sun Pharmaceuticals.
The demand for pharmaceuticals surged in 2021 due to covid. Therefore, investing in health care sector is the best investment choice.
Medi caps Ltd. currently has a Book value of Rs 91. Whereas, it is currently trading at Rs 47.
The company has shown tremendous 12 months return compared to its peers i.e. 182%. It is a good time to consider this stock as it is not in overbought zone.
Apart from that the company also have good financials listed below:-
| Medi caps Limited | ||
| 1 | Current Ratio – 9.83 | |
| 2 | Debt to Equity Ratio – 0.7 | |
| 3 | Return On Capital Employed – 12.11% | |
| 4 | Shareholding Pattern – Pledges Share – Zero Pledged Shares | |
| 5 | Inventory Turnover Ratio – 5.25 | |
| 6 | Free Cash Flow – 13.06 Crore | |
| 7 | Reserves and Surplus – 92.24 Crores | |
| 8 | P/E Ratio – 5.28 | |
Disclaimer: We are not SEBI registered Brokers. Please consult your financial advisor before investing or trading.
A commerce graduate who is on a mission to educate people about investment and personal finance.
Great penny stocks, I have made 50% profits from brightcom.