Penny stocks are low-priced stocks with small market capitalization. Due to their illiquidity and wide bid-ask spread, they fall in the category of risky and speculative stocks. However, their potential for higher returns at low costs makes them an appealing investment choice.

Amid this backdrop, investors could consider investing in high-risk, high-reward penny stocks Taboola.com Ltd. (TBLA), Ironwood Pharmaceuticals, Inc. (IRWD), and Castor Maritime Inc. (CTRM) with significant potential.

The U.S. economy is getting better, as evidenced by the second quarter reports. The economy grew at a 2.8% rate in the second quarter, with solid consumer spending growth and rising business investment. Inflation pressures have also eased recently, raising expectations of an interest rate cut from the Federal Reserve soon.

Amid this, investors attempt to spread their money across different segments and different market caps. Among these are penny stocks, which are stocks of small publicly traded companies listed on stock exchanges for a price under $5. Usually, investors with high-risk tolerances turn to these stocks, as these allow investors to hold thousands of shares in a smaller capital.

Penny stocks have a strong advantage over high-priced stocks of possible price spikes to multi-dollar levels where investors stand to be rewarded handsomely by investing significantly less. However, penny stocks are also considered highly volatile and speculative due to their large bid-ask spreads, small market capitalization, and lack of liquidity.

Thus, investors with a high-risk appetite can invest in high-risk, high-reward penny stocks that have higher return prospects and yield handsome rewards.

Given the industry’s bright prospects, let’s delve into the fundamentals of some of the high-risk, high-reward stocks such as TBLA, IRWD, and CTRM.

Taboola.com Ltd. (TBLA)

TBLA operates an artificial intelligence-based algorithmic engine platform internationally. The company offers Taboola, a platform that partners with websites, devices, and mobile apps to recommend editorial content and advertisements on the open web to users.

On August 30, TBLA unveiled its performance advertising-focused bidding technology, Maximize Conversions, for all advertisers. Maximize Conversions is an AI-powered technology that allows Taboola advertisers to drive more conversions and lower costs for campaigns.

On August 5, TBLA expanded its partnership with DoubleVerify, the leading software platform for digital media measurement, data, and analytics, with the integration of Doubleverify’s authentic marketplace solution, offering brands a more granular way to customize brand safety.

The integration gives brands confidence that their ad investments are matched with the appropriate content environment, leading to better performance.

Also, on July 24, TBLA introduced Taboola for Audience, a new AI-powered technology to empower publishers to drive higher traffic. It combines AI-powered personalization capabilities into a single, unified audience development platform and includes exclusive acquisition channels, reader experience personalization, and actionable audience insights.

TBLA’s revenues for the second quarter that ended June 30, 2024, increased 29% year-over-year to $428.20 million. Its gross profit grew 18.2% from the year-ago value to $144.80 million. The company’s adjusted EBITDA came in at $37.23 million, reflecting growth of 137.7% from the prior year’s quarter.

In addition, the company’s cash and cash equivalents were $182.20 million as of June 30, 2024, compared to $176.11 million as of December 31, 2023.

Street expects TBLA’s revenue and EPS for the third quarter (ending September 2024) to increase 19.2% and 321.1% year-over-year to $429.40 million and $0.08, respectively. Also, the company has topped the consensus EPS estimate in all of the trailing four quarters.

Shares of TBLA have surged 0.9% over the past month and 1.5% over the past nine months to close the last trading session at $3.50.

TBLA’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

The stock has a B grade for Sentiment, Value, and Growth. Within the A-rated Advertising industry, TBLA is ranked #3 out of 16 stocks.

Click here to access additional ratings of TBLA for Momentum, Stability, and Quality.

Ironwood Pharmaceuticals, Inc. (IRWD)

IRWD is a healthcare company that focuses on the development and commercialization of gastrointestinal (GI) products. The company markets linaclotide, a guanylate cyclase type-C (GC-C) agonist for treating adults suffering from irritable bowel syndrome. It is also developing IW-3300, a GC-C agonist for treating visceral pain conditions.

IRWD’s trailing-12-month EBIT margin and levered FCF margin of 29.79% and 24.31% are 1144.3% and 1850% higher than the respective industry averages of 2.39% and 1.25%. Likewise, the stock’s trailing-12-month gross profit margin of 67.95% is considerably higher than the industry average of 57.59%.

During the second quarter that ended June 30, 2024, IRWD posted total revenues of $94.40 million. Its income from operations was $24.98 million, against a loss from operations of $1.08 billion in the prior year's quarter. Its non-GAAP net income and adjusted EBITDA amounted to $1.51 million and $27.91 million for the quarter, respectively.

Analysts expect the company’s revenue for the fiscal year (ending December 2025) to increase 2.3% year-over-year to $364.50 million, while its EPS for the same period is expected to grow 184.3% year-over-year to $0.33. Moreover, IRWD’s shares have declined 28% over the past month to close the last trading session at $5.06.

IRWD’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Value and Quality and a B for Growth. Within the Medical - Pharmaceuticals industry, IRWD is ranked #33 out of 158 stocks.

In addition to the POWR Ratings we’ve stated above, we also have IRWD ratings for Stability, Momentum, and Sentiment. Get all IRWD ratings here.

Castor Maritime Inc. (CTRM)

Headquartered in Limassol, Cyprus, CTRM provides shipping services globally. The company operates in Dry Bulk Vessels and Containerships segments. It offers seaborne transportation services for dry bulk cargo; and commodities, such as iron ore, coal, soybeans, etc.

On July 16, CTRM entered, through a separate wholly-owned subsidiary, into an agreement to acquire a 2015-built Ultramax dry bulk carrier vessel from an unaffiliated third party for a purchase value of $25.5 million.

With the acquisition, CTRM is entering the Ultramax segment and will work towards its objective of renewing and developing its fleet. The company look forward to seek further opportunities in the shipping space.

On May 28, CTRM completed the previously announced sale of the M/V Magic Horizon, a 2010-built Panamax bulk carrier vessel, for a price of $15.8 million. It expects to generate a net gain of about $4.6 million from the sale.

For the second quarter that ended June 30, 2024, CTRM reported total vessel revenues of $16.28 million. Its operating income rose 104% from the year-ago value to $15.57 million. The company’s net income and EPS amounted to $22.85 million and $1.02, up 179.1% and 18.6% from the prior year’s quarter, respectively.

Furthermore, the company’s adjusted EBITDA grew 86.6% year-over-year to $25.23 million.

CTRM’s stock has increased 1.8% over the past six months and 5.6% over the past year to close the last trading session at $4.54.

CTRM’s POWR Ratings reflect its sound fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

CTRM has an A grade for Value and Quality. It also has a B grade for Momentum. It is ranked #7 out of 39 stocks in the A-rated Shipping industry.

In addition to the POWR Ratings we’ve stated above, we also have CTRM ratings for Sentiment, Growth, and Stability. Get all CTRM ratings here.

What To Do Next?

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TBLA shares were trading at $3.27 per share on Tuesday afternoon, down $0.23 (-6.57%). Year-to-date, TBLA has declined -24.48%, versus a 16.88% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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