With the possibly of multiple rate cuts in the next 12 to 24 months, the markets seem to be gearing up for higher trading and speculative activity. There are early signs of another meme stock frenzy. While purely speculative ideas can deliver multibagger returns in quick time, it’s important to focus on stocks where fundamentals are likely to back a stellar rally. This column talks about three high-growth penny stocks for five-bagger returns within the next 30 months.
It’s very likely that these penny stocks will be a part of the meme frenzy. However, when the euphoria dies, these penny ideas are unlikely to plunge. The reason is good fundamentals and an attractive business model.
Further, the following penny stocks will likely deliver healthy revenue and EBITDA growth. This will support a sharp rally from undervalued levels. Let’s discuss the catalysts that are likely to support robust revenue growth for these businesses.
Ring Energy (REI)
To support global GDP growth, monetary policies will remain expansionary in the next 24 months. This is positive for asset classes like energy and industrial commodities. Oil has been relatively subdued. But, expect a strong rally in the coming quarters. Therefore, oil & gas exploration penny stocks are attractive. Ring Energy (NYSE:REI) is an undervalued exploration company with multibagger returns potential.
Additionally, REI stock has remained sideways in the last 12 months. Many expect a breakout on the upside after this phase of consolidation. Notably, Ring Energy has a market valuation of $316 million. In comparison, the PV10 of the company’s assets is $1.65 billion. This puts into perspective the extent of undervaluation. Once oil trends higher, the valuation gap will be covered.
Importantly, Ring Energy boasts a solid track record of production growth. Between 2018 and 2023, production growth has been at a CAGR of 26%. Production upside has been supported by opportunistic acquisitions.
At the same time, Ring Energy has reported positive free cash flows on a sustained basis. With potentially higher realized oil price, it’s likely that FCF will swell and translate into higher financial flexibility.
Blade Air Mobility (BLDE)
With a unique business model and healthy growth, Blade Air Mobility (NASDAQ:BLDE) is a steal at a market valuation of $250 million. BLDE stock has remained sideways in the last 12 months. However, during this period, the business has progressed well. A strong upside may be impending.
As an overview, Blade Air Mobility is a provider of air transport alternative along congested ground routes in Northeast U.S., Southern Europe and Western Canada. The company has an asset-light model and operates under two business segments, passenger transport and medical transport.
In terms of growth catalysts, there are two points to note. First, Blade Air is operating in a limited geography. As the company expands within the U.S., there is ample headroom for growth acceleration.
Further, in the last twelve-months, the medical transportation segment has reported revenue growth of 56% year-over-year (YOY) to $136 million. The company claims to be the largest dedicated air transporter of human organs for transplant in the U.S. This segment has a higher EBITDA margin as compared to the passenger business.
Yatra Online (YTRA)
Some of the best travel stocks have witnessed a strong rally in the post-Covid-19 world. It’s estimated that by 2030, Indian travelers are likely to be the fourth largest global spenders. So, massive opportunity may await Yatra Online (NASDAQ:YTRA).
Specifically, Yatra Online is among the largest online travel booking companies in India. Along with a big opportunity, the Indian markets have intense competition. However, Yatra Online has a key differentiating factor. The travel bookings company has a leading market share in India’s corporate travel market. Currently, the company has 849 large corporate clients with an addressable employee base of over seven million. This presents a huge opportunity for growth.
At the same time, Yatra Online is expanding its presence in the business-to-consumer market. This is likely to support significant growth acceleration and improvement in EBITDA margin. At current levels of $1.2 and a forward P/E of 9.2, YTRA stock looks massively undervalued.
On the date of publication, Faisal Humayun did not hold (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.
