Penny stock investing has always been a risky endeavor. The case is particularly true when market volatility is high.
Before we move on, let’s just take a look at what’s been going on in the world economy: China’s stock market crashed big time and the country is devaluing its yuan; the European Central Bank is trying to save the eurozone economy by printing money to buy assets; the U.S. Federal Reserve has said that it would raise interest rates in the remainder of 2015.
With valuations still high today, whether the stock market can handle a rate hike remains uncertain. The overall stock market outlook is not really bullish, to say the least. And finding growth in large companies today has been quite difficult.
Investing in penny stocks is all about investing in the companies’ potential. For instance, a biotech company might hit it big when it successfully commercializes its drug candidates.
On the other hand, risk is also substantial as the company’s revenue may be compromised if it fails to complete the development of its product candidates or if it fails to obtain their regulatory approval. Anyway, for those who are willing to conduct the due diligence of these high-risk investments, here are the top seven penny stocks for 2016.
Curis, Inc. (NASDAQ:CRIS)
Curis, Inc. (NASDAQ:CRIS) is a biotech company focused on the development and commercialization of drug candidates for the treatment of human cancers. Its most advanced drug candidate, CUDC-907, is an oral, small molecule inhibitor which has completed the dose escalation stage of a Phase 1 clinical study. Curis conducts research programs both internally and through strategic collaborations.
In the second quarter of 2015, the company’s revenue declined to $2.1 million from $4.8 million in Q2 2014. The decrease in revenue was mainly due to a decrease in license fee due to a $3.0 million milestone payment Curis received in the year-ago-period. (Source: Curis Inc., last accessed September 10, 2015.)
Curis is investing heavily in research and development, with R&D expenses surging from $3.3 million in Q2 2014 to $5.9 million in Q2 2015. The increase was primarily due to increased spending on its leading drug candidate and preclinical programs.
As a company still in the research and development stage of its product candidates, Curis is not yet profitable. In the second quarter, the company had a net loss of $8.1 million, translating for a loss of $0.06 per share.
Curis, Inc.’s stock price fluctuated quite a bit in recent months. Currently, the company’s shares trade at $2.61 apiece. Year-to-date, Curis’s stock price is up an impressive 74%.
Cincinnati Bell Inc. (NYSE:CBB)
Cincinnati Bell Inc. (NYSE:CBB) provides a variety of communication solutions to customers in Greater Cincinnati. It offers high-speed internet, video, and voice services. Cincinnati Bell is the region’s dominant telephone company.
The company is enjoying strong growth from its Fioptics segment, which offers a suite of high-speed internet, digital telephone, and entertainment services. In the second quarter of 2015, Fioptics revenue increased 32% year-over-year to $45.0 million. Moreover, the company now has more than 100,000 Fioptics video subscribers. At the end of the quarter, total internet subscribers reached a record high 275,100. (Source: Cincinnati Bell Inc., last accessed September 10, 2015.)
Cincinnati Bell’s total revenue for the quarter was $285.8 million, up one percent year-over-year. Revenue from strategic and consumer business products surged 20% year-over-year to $130 million.
The company improved its metrics by selling some of its stake in CyrusOne Inc. (NASDAQ:CONE). In the second quarter, Cincinnati Bell recognized a $295 million gain on the sale of 14 million CyrusOne partnership units. This helped to improve the company’s bottom line: diluted net earnings per common share increased from $0.53 in the year-ago period to $0.89.
Cincinnati Bell’s shares trade at $3.35 apiece, giving it a price-to-earnings ratio of 3.89. Year-to-date, the company’s stock price is up 5.01%.
Groupon, Inc. (NASDAQ:GRPN)
It is hard to believe that the once-hot e-commerce company is now trading at under five bucks.
Groupon Inc. (NASDAQ:GRPN) is an online marketplace that connects businesses and consumers by offering goods and services at a discount. Groupon was launched in November 2008 with its first market in Chicago. The company grew quickly and has served more than 500 markets worldwide.
Groupon’s financials look quite solid recently. In the second quarter of 2015, the company had a revenue of $738.4 million, a 3.1% increase year-over-year. Excluding the unfavorable impact from changes in foreign exchange rates, revenue would be up 11%.
Gross billings, reflecting the total dollar value of customer purchases, increased two percent year-over-year to $1.53 billion. Growth in gross billings would have been 10% excluding currency headwinds. (Source: Groupon Inc., last accessed September 10, 2015.)
The company remained profitable in the second quarter with GAAP earnings of $109.1 million, or $0.16 per share. Non-GAAP earnings turned out to be $13.8 million, or $0.02 per share.
Groupon’s stock price has been declining for a while now. Currently, the company’s shares trade at $4.21 apiece. Note that Groupon repurchased 19.3 million shares in the second quarter. Moreover, up to $461 million worth of its shares remain available for repurchase under Groupon’s share buyback program through August 2017.
Geron Corporation (NASDAQ:GERN)
Geron Corporation (NASDAQ:GERN) is a clinical stage biopharmaceutical company specializing in the development and commercialization of therapeutic products for cancer that inhibit telomerase.
The company’s stock performance had been pretty good up until August when a decline wiped out most of its gains since the beginning of this year. Currently, Geron’s shares trade a $3.28 apiece.
Recently, there was some good news about this biotech company. In June, the United States Food and Drug Administration (FDA) granted orphan-drug status to imetelstat for the treatment of myelofibrosis.
In early September, Geron Corporation announced the publication of two papers in The New England Journal of Medicine in which its telomerase inhibitor, imetelstat, “was shown to have disease-modifying activity thought to be associated with selective inhibition of the malignant progenitor cell clones responsible for the underlying disease in two hematologic myeloid malignancies, essential thrombocythemia (ET) and myelofibrosis (MF).” (Source: Geron Corp., last accessed September 10, 2015.) The company’s share price rose as much as 20% upon the news.
Advanced Semiconductor Engineering Inc. (NYSE:ASX)
Advanced Semiconductor Engineering Inc. (NYSE:ASX) is the world’s largest provider of independent semiconductor manufacturing services in assembly and test. The company also provides integrated solutions for electronics manufacturing services in relation to computers, peripherals, communications, industrial, automotive, and storage and server applications. The company was founded in 1984 and is headquartered in Kaohsiung, Taiwan.
Growth has been strong for the semiconductor company. In the second quarter of 2015, net revenue totaled NT$70,222 million, a 20% increase year-over-year and a nine percent increase sequentially. The growth in revenue was offset by a surge in cost. In the second quarter, cost of revenue increased 27% year-over-year to $58,656 million. Net income declined from NT$5,106 million in Q2 2014 to NT$3,652 in Q2 2015. Diluted earnings per share came in at NT$0.43 (US$0.070 per ADS). (Source: Advanced Semiconductor Engineering, last accessed September 10, 2015.)
Trading at $5.35 a share, Advanced Semiconductor Engineering has a price-to-earnings ratio of 11.78. The company is also paying dividends with a yield of 6.05%.
First Majestic Silver Corp. (NYSE:AG)
First Majestic Silver Corp. (NYSE:AG) is a Canadian silver mining company. It operates in Mexico, one of the most mining-friendly countries.
The company owns five silver-producing mines and has two future projects. Despite the downfall of silver prices, First Majestic’s silver production increased. It expects production to be between 11.8 and 13.2 million ounces in 2015.
During hard times like this, cutting costs is crucial. First Majestic has reduced its costs substantially: all-in sustaining cost was $14.49 per payable silver ounce in the second quarter of 2015, a 20% reduction compared to $18.18 per ounce in the second quarter of 2014. (Source: First Majestic Silver Corp., last accessed August 31, 2015.)
The company’s stock price dropped quite a bit as precious metals got crushed. Right now shares of First Majestic Silver Corp. trade at $2.81 apiece, losing nearly 70% in value since its 52-week high of $9.34. However, if silver prices were to bounce back, solid companies like this one will see big returns.
Avon Products Inc. (NYSE:AVP)
Avon Products Inc. (NYSE:AVP) is a manufacturer and marker of beauty and related products. The company’s products fall into two categories: Beauty and Fashion & Home. Its Beauty products include color, fragrance, skincare, and personal care products. Fashion and Home consists of jewelry, watches, apparel, footwear, accessories, gift and decorative products, housewares, entertainment and leisure products, children’s products, and nutritional products.
Avon does its business mainly through direct selling. By the end of 2014, the company had sales operations in 60 countries and territories and distributed its products in 41 other countries and territories.
Currency headwinds have tamed down the company’s financial results recently. In the second quarter, total revenue for Avon Products declined 17% year-over-year to $1.8 billion, but was relatively unchanged under a constant currency. (Source: Avon Products Inc., last accessed September 10, 2015.)
Avon managed to improve its bottom line in the recent quarter. Net income came in at $30.0 million, translating to an EPS of $0.07, compared with $20.0 million, or $0.04 per share in the second quarter of 2014.
Note that Avon is also paying dividends. At today’s stock price of $4.13, the company has a dividend yield of 5.73%.