Can you get rich by trading penny stocks?

While penny stocks represent a high-risk investment option and could potentially make shareholders lose a lot of money, that's not a golden rule. Some penny stocks could have high-percentage returns. For example, if you purchase 10 shares of a stock at $1 per share and the price jumps by $1, your investment will double, as opposed to buying 10 shares at $100, in which case you'd only get a $10 profit from your $1,000 investment.

How do I pick a good penny stock?

Before investing your hard-earned money in penny stocks, you need to take the following actions: Use only funds you can afford to risk. Understand the market conditions. Do some research on the company. Learn about share pricing and valuation.

How high can a penny stock go?

There is no limit on how high a penny stock can go. However, when reaching over $5 per share, it would cease to be considered a penny stock.

Advertiser Disclosure

5 Best Penny Stocks To Buy Now

September 5, 2024

6 min Read

Written by Daniela Rivera-Herrera

Edited by Melanie Grafil

Kameleon007 / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Despite their high risk and poor reputation, penny stocks are highly popular among investors. And while they are notoriously volatile, that doesn’t mean you can’t find a hidden gem once in a while. If you’re interested in trying your luck investing in penny stocks, here are some worth keeping an eye on.

5 Penny Stocks To Keep on Your Watchlist

Last year ended on a high note for small-cap stocks — the category into which many penny stocks fall. While small market capitalizations and low share prices make these stocks inherently risky, there are still some investors willing to take the risk in the hope a penny stock will take off.

If you’re one of them, here are five of the best penny stocks to keep on your radar this year:

Crexendo Inc. (Nasdaq: CXDO)
Outbrain (Nasdaq: OB)
Bolt Biotherapeutics Inc. (Nasdaq: BOLT)
Ring Energy Inc. (NYSE: REI)
DocGo Inc. (Nasdaq: DCGO)

1. Crexendo Inc. (Nasdaq: CXDO)

Crexendo is America’s fastest-growing uniform communications-as-a-service provider, with a user base that recently surpassed 5 million. Its cloud-based VIP platform — for video, interaction and phone — integrates with over 400 software-as-service applications, including Salesforce, Microsoft Teams, Hubspot and Zendesk.

Just five analysts watch the stock, and all five rate it a “buy.” The price target is $6.50, which is 44% higher than the closing price on Sept. 4.

Share price as of Sept. 4: $4.50
Market cap: $120.22 million

2. Outbrain (Nasdaq: OB)

Outbrain uses predictive artificial intelligence to give marketers and publishers insights into their audience engagement. Its partners include Honda, Samsung, Mercedes-Benz, L’Oréal, Red Bull and other well-known brands. Among the uses for Outbrain’s platform is to produce the recommendations that help consumers explore and discover content that’s relevant to them.

With a market cap of just $245.07 million, Outbrain is a micro-cap company, and it’s not yet profitable. But its position in the AI industry and recent earnings beats — including a break-even in the second quarter — suggest that Outbrain might be worth the risk for investors willing to hold onto the stock for the long term.

Analysts expect Outbrain to finish 2024 with 112.50% earnings growth, and they estimate a staggering 2,400% growth in 2025. They’re cautious about the stock, with three out of five analysts recommending holding and two calling it a “buy.” The price target is $6, which is 20% above the current share price.

Share price as of Sept. 4: $4.98
Market cap: $245.07 billion

3. Bolt Biotherapeutics Inc. (Nasdaq: BOLT)

This clinical-stage immuno-oncology company is known for developing tumor-targeted therapies that take advantage of the inherent adaptability of the immune system. It’s most famous for its immune-stimulating antibody conjugate, which uses immunostimulants that activate myeloid cells to kill tumor cells. The company currently has two products, each of which targets several cancers, in its pipeline.

Analysts give BOLT a “hold” rating with an average price target of $1.58.

Share price as of Sept. 4: $0.66
Market cap: $25.26 million

4. Ring Energy Inc. (NYSE: REI)

Ring Energy is an oil and gas exploration and production company based in Texas. Perhaps in anticipation of the strong second-quarter financial report and earnings surprise Ring delivered on Aug. 8, the number of analysts watching Ring grew from three to 10, all of whom have a “buy” or “strong buy” rating on the stock. The P/E ratio is just 4.50, suggesting the stock is significantly undervalued.

Share price as of Sept. 4: $1.62
Market cap: $321.04 million

5. DocGo Inc. (Nasdaq: DCGO)

DocGo provides mobile health services, including on-demand urgent care, preventative services, remote patient monitoring and medical transportation, in 26 U.S. states and in the U.K. Its partners include hospitals and health systems, state and local governments, medical practices, employers and health plans.

The company experienced 42% revenue growth last year, with mobile health services and transportation services gaining 36% and 58%, respectively. With a P/E ratio of 12.68, the stock appears to be a good deal. Analysts predict a 12-month increase to $6.21. Five out of seven analysts rated the stock a “buy” in August, and two analysts rated it a “strong buy.”

Share price as of Sept. 4: $3.55
Market cap: $363.23 million

What Exactly Is a Penny Stock?

Historically, in the United States, penny stocks were those traded for less than $1 per share. However, in recent years, that definition has evolved to include all shares trading under $5.

Penny stocks are typically traded over the counter, meaning all exchanges are performed through decentralized dealer networks with no need for an exchange regulator’s supervision. However, some penny stocks are traded on large stock exchanges like the New York Stock Exchange.

Final Take

Penny stocks can be a good alternative for traders who lack the capital to make more substantial investments. Although they involve higher risk than other options available, there’s always the possibility of stumbling upon a hidden gem. Just remember to always do your due diligence and tread carefully.

Advice

Penny stocks can make investors a lot of money, but they can also make them lose a lot. Before trading these high-risk shares, it’s essential to do some research to avoid any unpleasant surprises in the long run.

Penny Stock FAQ

Here are the answers to some of the most frequently asked questions about penny stocks.

Can you get rich by trading penny stocks?
- While penny stocks represent a high-risk investment option and could potentially make shareholders lose a lot of money, that's not a golden rule. Some penny stocks could have high-percentage returns.
- For example, if you purchase 10 shares of a stock at $1 per share and the price jumps by $1, your investment will double, as opposed to buying 10 shares at $100, in which case you'd only get a $10 profit from your $1,000 investment.
How do I pick a good penny stock?
- Before investing your hard-earned money in penny stocks, you need to take the following actions:
  - Use only funds you can afford to risk.
  - Understand the market conditions.
  - Do some research on the company.
  - Learn about share pricing and valuation.
How high can a penny stock go?
- There is no limit on how high a penny stock can go. However, when reaching over $5 per share, it would cease to be considered a penny stock.

Daria Uhlig contributed to the reporting for this article.

Data was compiled after the close of trading on Sept. 4, 2024, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.