Penny Stocks to Buy? 3 Under $4 to Add to Your Portfolio Now

As investors eye a year-end rally amid cooling inflation and the Fed's slower rate hike this month, it could be worth investing in fundamentally sound penny stocks Waterdrop (WDH), Overseas...

Penny Stocks to Buy? 3 Under $4 to Add to Your Portfolio Now

Investors are looking for a rally in the year-end despite cooling inflation and the Fed's slower rate increase this month. It might be worth investing on fundamentally sound penny stocks Waterdrop, Overseas Shipholding Group and Good Times Restaurants (GTIM), all of which trade below $4. Read ....

Investors are more optimistic about a rally at the end of the year due to a slowdown in inflation, and the Fed decreasing the rate hike to 50 base points this month. There is a 77.9% chance that we will see a Santa Rally as we get closer to the year-end.

The Fed raised its benchmark interest rate to the highest in 15 years, and indicated that it would continue to raise rates until next year. This has fueled fears of recession. John Stoltzfus is Oppenheimer's chief investment strategist. He stated that "We are actually heading out of the woods" but was not yet out of the woods.

These penny stocks can make a huge difference in your portfolio. Because of their low prices investors get more for their money than with the more expensive options. Even minor increases in share prices can yield significant percentage gains, and thus major returns for investors.

These stocks, which trade below $4, are fundamentally sound and could make solid additions to your portfolio.

Waterdrop Inc. (WDH)

WDH is based in Beijing and offers online insurance brokerage services that connect users to related insurance products underwritten in China by insurance companies. It also provides short-term and longer-term life and health insurance products and services.

The company introduced insurance against breast cancer recurrence on November 4 for those aged 18 to 65. The insurance has a low threshold, flexibility, large coverage, and no deductibles for Anti-Cancer Drugs. This insurance will provide financial protection for the insured and help them to manage their finances in the event of a recurrence.

WDH launched 'Waterdrop Family Insurance needs Diagnosis (WFind) on September 19. This system is designed to assist brokers in analyzing customer insurance requirements based upon information about family members, income and expenses. The new technology will make it easier and more efficient to work with brokers.

WDH's operating profit was RMB132.56 millions ($19 billion), compared to an operating deficit of RMB512.99 million ($73.54 trillion) for the third quarter ending September 30, 2022. WDH's adjusted net profit was RMB215.73million ($30.93 Billion) compared to a net loss RMB453.64million ($65.03 Billion). Its EPS was RMB0.04, which is an increase of 133.3% over the previous year.

WDH's forward EV/Sales is 0.89. This is 68.3% less than the industry average 2.80x. The forward EV/EBITDA multiplier of WDH is 5.03, which is 57.6% less than the industry average 11.87x.

Analysts predict that WDH's fourth quarter revenue and EPS will increase by 107.5% year-over-year, to $0.03 million and $100.70 millions, respectively. The stock gained 114.7% over the past nine months to close at $2.19 in the last trading session.

WDH's solid fundamentals are evident in its POWR Ratings. It has an overall rating A according to our proprietary rating system. This means it is a Strong Buy. The POWR Ratings evaluate stocks by 118 factors, each with its respective weighting.

It holds a B-grade for Quality, Growth, Momentum and Sentiment. It is #3 among 43 stocks in China's industry. Click here for additional WDH ratings on Value and Stability.

Overseas Shipholding Group, Inc.

OSG is the operator and owner of an oceangoing fleet that transports crude oil and other petroleum products in the U.S. flag trading. This company is available to independent oil traders, refinery owners, and government agencies.

OSG announced on December 8 that it had extended its six bareboat charter agreement with American Shipping Company ASA by three years, beginning in December 2023.

"We believe that the market continues to support attractive opportunities for these vessel leasings to supplement the strong, stable cash flow generation of our niche businesses," stated Sam Norton, OSG President and CEO.

OSG's shipping revenue increased by 30.9% year over year for the third quarter ending September 30, 2022 to $123.06million. Its net income was $13.25 million, which is a significant improvement on the $16.01 million net loss in the previous year. Its EPS was $0.15, which is compared to $0.18 per share in the previous-year period.

OSG currently trades at 1.61x in trailing 12-month EV/Sales. This is 13.7% less than the industry average 1.87x. The trailing 12-month Price/Sales multiple for OSG is 0.57, 55.6% less than the industry average 1.27. The stock's trailing 12-month Price/Book ratio is 0.69x, which compares with the industry average 1.79x.

The stock gained 67.9 in the past year, and has increased 50% year-to date to close at $2.82.

The OSG's optimistic outlook is reflected in its POWR Ratings. It is rated A overall, which corresponds to a Strong Buy according to our proprietary rating system.

It is rated A for Momentum, Quality, and B for Growth and Value. It is the first-ranked ship in the 46-stock A-rated Shipping sector. Click here to view OSG's Stability rating.

Good Times Restaurants Inc.

GTIM operates and owns Good Times Burgers & Frozen Custard restaurants, as well as Bad Daddy's Burger Bar restaurant chains in the United States.

GTIM's fiscal fourth quarter revenues increased by 5% to $35.19million, compared with the previous year. Restaurant sales increased by 5% to $34.95 Million. Bad Daddy's Burger Bar sales increased 6.2% to $25.97million. For the same period, EBITDA adjusted by the company was $870,000.

GTIM trades at 0.52x in trailing-12 month EV/Sales. This is 52.9% less than the industry average 1.09x. GTIM's trailing 12-month Price/Sales multiple is 0.21, which is 74.5% less than the industry average 0.83.

GTIM's annual EPS growth is expected to be 30% over the next five-years. Stock has fallen 8.3% in the past month, closing the last trading session at $2.34.

GTIM's POWR Ratings are a reflection of solid prospects. It is rated A overall, which is equivalent to a Strong Buy according to our proprietary rating system.

It is rated A for Value, B for Growth, Momentum and Sentiment, as well as B for Quality. It is the first-ranked stock in the A-rated Restaurants sector. Click here to see GTIM's Stability rating.

WDH shares lost $0.08 or -3.65% in premarket trades Monday. WDH shares have gained 52.90% year-to-date compared to a -18.33% increase in benchmark S&P 500 over the same period.

Shweta Kumari is the author

Shweta's deep interest in quantitative analysis and financial research led her to become an investment analyst. She applies her knowledge to assist retail investors in making educated investment decisions.

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