When talking about penny stocks for 10 cents or less, the term “best” may not be a word that first comes to mind. Many penny stocks, almost all of which trade over-the-counter (or OTC) rather than on a major exchange, trade at bargain basement prices for a reason.
For instance, many of the names in this category wound up trading for literal pennies, due to heavy dilution from what’s known as “death spiral financing.”
Other times, stocks trade this cheaply as a result of a lack of information and/or a sketchy operating history. Cons, scams and market manipulation are rampant in this area of the market.
A lack of liquidity is another factor behind these super-low stock prices. OTC-traded stocks with low volume many times will have extremely high bid/ask spreads.
Having said all this, if you are active in OTC stocks and have a high appetite for risk, you may want to take a look at these seven penny stocks for 10 cents or less. Each one has been recently profitable (on an EBITDA basis) or trades at a discount to its book value.CHUC Charlie’s Holdings $0.082 ELTP Elite Pharmaceuticals $0.038 RSCF Reflect Scientific $0.086 STCC Sterling Consolidated $0.057 TCLRY Technicolor SA $0.090 VASO Vaso Corporation $0.11 XDSL mPhase Technologies $0.035
Charlie’s Holdings (CHUC)Source: Shutterstock
Charlie’s Holdings (OTCMKTS:CHUC) is a purveyor of vaping products.
CHUC stock, like all the stocks on this list actually is making products rather than merely having an idea for one. It generates tens of millions in annual revenue from the sale of nicotine and THC vaping devices. Last year, it even generated positive operating income, although it was only $565,000.
While in the most recent quarter, Charlie’s reported an operating loss of basically the same amount ($562,000), this may not be necessarily a sign of a worsening situation.
The company has ramped up spending to promote its existing products and launch new ones. Its efforts may result in materially stronger results down the road. Upon further research into its business, this could be a worthwhile high-risk, high-potential return opportunity.
Elite Pharmaceuticals (ELTP)Source: Iryna Imago / Shutterstock.com
While Elite Pharmaceuticals (OTCMKTS:ELTP) stock has a market cap of just $36.4 million may not scream “top of the heap,” it could still be a profitable investment.
For one, shares in this branded and generic pharmaceutical company are undervalued. ELTP stock at present sells for just 6x trailing twelve-month (or TTM) earnings. The company recently raised $12 million via debt financing. It could use this cash to pursue opportunities that enable it to further improve its profitability.
On its most recent earnings conference call, ELTP CEO Nasrat Hakim mentioned several possible uses of the proceeds, including using it to acquire full ownership rights to one of its key products, Amphetamine (a generic version of Adderall).
Undervalued and under-the-radar, further developments could send this stock substantially higher.
Reflect Scientific (RSCF)Source: Shutterstock
Reflect Scientific (OTCMKTS:RSCF) is another of the penny stocks for 10 cents or less that has a profitable business. The company makes life science equipment, including cryogenics products, chromatography products and vials.
RSCF stock right now trades for only 9.8x TTM earnings. The supply chain crisis affected its performance last quarter, but as this headwind clears up, the company could continue to steadily generate sales and earnings. Admittedly, this may at best be a “value is its own catalyst” type of play.
That is, it may be something that you buy because it’s undervalued and have to wait for several years for either the market to appreciate it. Or, wait for someone like a strategic acquirer to come in and buy it at a substantial premium. Nevertheless, if you like to invest in undervalued OTC stocks, it’s one to keep an eye on.
Sterling Consolidated (STCC)Source: Shutterstock
A maker of O-rings and related seal products, Sterling Consolidated (OTCMKTS:STCC) has a business as old-school as its name. According to OTCMarkets.com, Sterling has reported positive operating income in each of the past four years.
Along with a profitable operating business, there’s something else that’s appealing with STCC stock: a “hidden” asset. The company owns its facility in Neptune, New Jersey, and leases a portion of it to third-party tenants. This 28,000-square-foot building is likely worth more than the $918,115 reported on the company’s books as the net value of its property and equipment.
If it ever monetizes this property, it could produce quite the windfall for this company, with a market cap of just $2.68 million. While liquidity is obviously an issue, small investors active in under-the-radar stocks may want to keep an eye on it.
Technicolor SA (TCLRY)Source: whiteMocca / Shutterstock
Technicolor SA (OTCMKTS:TCLRY) may be the largest of the penny stocks for 10 cents or less per share. There’s a reason why it ended up at such rock-bottom prices. The France-based media and electronics conglomerate filed for bankruptcy in 2020.
However, after selling off assets like its namesake post-production unit, and more recently its trademark licensing unit (which licenses the RCA trademark to third parties), the company has restructured. Investors in TCLRY stock have avoided a total wipeout. Furthermore, the company is making more reorganization moves.
It plans to spin off its Technicolor Creative Services (or TCS) unit, which provides visual effects and animation production services for the entertainment industry. This could help unlock value for shareholders.
Appreciation of the fact can be found in the results for both TCS and its other operating segments. That could help shares move higher.
Vaso Corporation (VASO)Source: shutterstock.com/MAD.vertise
Vaso Corporation (OTCMKTS:VASO) trades for more than a dime, but a return above the 10 cent mark has only happened recently. Shares in the medical technology company have surged in recent months thanks to a big improvement in its operating performance. Vaso has experienced a big jump in revenue growth.
This has translated into relatively high earnings for this micro-cap company. Last quarter alone, it generated net income of $1.5 million. That’s impressive, given the current market cap of VASO stock (just $20.1 million). This is yet another low-priced penny stock that also sports a low earnings multiple.
Don’t think you’ve missed the boat with Vaso just because it’s rallied 120% year-to-date. Still cheap despite its surge so far in 2022, there may be more room for it to run. Even if economic conditions worsen, the recession-resistant nature of the healthcare sector may enable it to continue thriving.
mPhase Technologies (XDSL)Source: Blue Planet Studio / Shutterstock
At first glance, mPhase Technologies (OTCMKTS:XDSL) sounds like just another gimmicky penny stock. However, this early-stage company is deserving of a valuation higher than its current stock price.
XDSL stock trades at a sharp discount to its tangible book value. At current prices, it has a market cap of $4.23 million. Per its most recently reported financials, it has net tangible assets of $11.3 million. That said, before you run out and buy this stock, seemingly trading at a discount to its liquidation value, there is a big caveat.
Its key current asset consists of outstanding accounts receivable. It’s unclear how much it will ultimately collect from this amount ($24.2 million). Still, the fact it has tangible assets to speak of may by default makes it one of the penny stocks under 10 cents per share that’s worthy of consideration.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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