In the year gone by, investors continued to look for next Federal Reserve’s decision. Apart from this, investors were waiting for the CPI or jobs report. Even though there have been clear signals that inflation continues to decline and Fed has plans to cut interest rates in the coming year, investors continue to debate over the expected from the equity market. Global strategists are quite optimistic about the next year and they continue to expect that S&P 500 should touch the levels of ~5,100 by 2024 end. Despite the bullish views, these analysts expect that the possibility of recession is still there. Therefore, choosing the best fundamentally strong penny stocks is of utmost importance.
The US Federal Reserve’s latest announcement about the interest rates and hints about the dovish policy stance has decreased the possibility to recession to some extent. In the current economic environment, investors should look for upgrades in macro-consensus. There are analysts who are expecting that strong momentum which was seen by renowned technology stocks such as Meta Platforms Inc, NVIDIA Corp and Amazon.com Inc might continue in 2024 too.
The biggest open secret in the equity market is that wise investors always look beyond short-term market cycles and focus on the long-term horizon. Penny stocks have the ability to outperform overall market index. Whether or not we will see the recession in 2024 remains out of question if an investors invests in strong penny stocks which are poised to grow forever. Therefore, it all comes down to investing in the best fundamentally strong penny stocks for long-term investment.
Investors are required to screen the stocks which have strong EPS growth, positive sales and buy or better ratings from the Wall Street analysts.
Thus, we will now have a look at best fundamentally strong penny stocks for long-term investment.
1. Information Services Group Inc.
The company is the US-based technology insight, market intelligence, and advisory services firm. It provides digital transformation services including automation and cloud & data analytics, managed governance, etc.
It saw GAAP revenues of $72 million in 3Q, which was the record one, with net income coming at $3.2 million, GAAP EPS of $0.06 and adjusted EPS of $0.11. The company’s 3Q adjusted EBITDA was $11 million. It has acquired Ventana Research and expanded ISG Research coverage into $800 billion software sector.
Recurring revenues of the company went up by 19%, revenues in Europe grew by 14% and firm-wide adjusted EBITDA margin saw an improvement of 120 basis points from previous quarter even though there has been more difficult macro-economic environment. Such results were supported by continued focus on execution and proactive management of current demand environment. Acquisition of Ventana Research led to the expansion of Information Services Group Inc.’s capabilities during the time when the companies continue to leverage software and services to improve operating performance, deliver strong customer and employee experiences, and growth.
The company saw $3.2 million of cash from operations in 3Q as compared to $0.3 million used from operations in 3Q of the previous year. Cash balance of the firm totalled $18.7 million as at September 30, 2023, exhibiting a fall from $19.6 million at June 30, 2023.
For 4Q, the company continues to target revenues in the range of $68 million – $71 million and adjusted EBITDA of $9.0 million – $10.5 million.
2. Ring Energy, Inc.
The company is an oil and gas exploration and production company which is based out in Midland, Texas. Activities consist of acquisition, exploration, development, and production of oil and natural gas fields.
It reported operational and financial results for 3Q23. In addition, it updated guidance for 4Q23 and announced successful sale of non-core operated New Mexico properties which closed on September 27, 2023. The company finally closed acquisition of the Founders Oil & Gas IV, LLC assets on August 15, 2023, and paid total cash of $50.0 million. During 3Q, the company saw average sales volumes growing to 17,509 barrels of oil equivalent per day (69% oil) from 17,271 Boe/d for 2Q23.
Its net loss came in at $7.5 million, or $(0.04) per diluted share, during 3Q23 as compared to net income of $28.8 million, or $0.15 per diluted share, in 2Q23. It generated record adjusted EBITDA of $58.6 million for 3Q23, exhibiting a 10% increase from $53.5 million in 2Q23, matching the record which was set in this year’s 1Q. It increased net cash provided by operating activities by 28% to $55.4 million in 3Q23 from $43.4 million in 2Q23.
It also completed the sale of its non-core operated New Mexico assets to private buyer for the consideration of $4.5 million which led to net proceeds of ~$3.8 million.
The company expects 4Q sales volumes of 18,900 – 19,500 Boe/d (69% oil, 16% natural gas, and 15% NGLs), including additional volumes expected from stepped up capital spending program. This excludes reduced volumes from New Mexico asset sale.
3. Iteris, Inc.
The company provides smart mobility infrastructure management solutions.
In 2Q24, it saw record revenue of $43.6 million, exhibiting a rise of 11% year over year. Its gross margins came in at ~37.3%, up by 2,060 basis points year over year as a result of successful supply chain improvement plan. Adjusted EBITDA of the company was $2.9 million, an improvement of $8.1 million, consistent with GAAP net income improvement.
It has reiterated full-year net cash flow guidance of between $12.0 million – $16.0 million as of result of adjusted EBITDA improvement and continued working capital management. It expects full-year adjusted EBITDA margin of between 7% to 9%.
Conclusion
While above are some of the best fundamentally strong penny stocks for long-term investment, there are several other small companies catering to this space which are expected to perform well.
In realm of investment, the US penny stocks continue to fascinate risk-seeking individuals that look for potential to see significant returns. The above-mentioned unique stocks provide alluring opportunity to make investments in emerging companies which might see remarkable growth.
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