Best Penny Stocks in August 2024 Based on 5Y CAGR

Penny stocks—shares of small companies trading between less than ₹10 per share—have long been a magnet for adventurous investors seeking high returns. The low prices and potential for explosive growth for these shares can be appealing, but they come with a unique set of risks and challenges. In this blog, we will delve into the world of penny stocks to help you navigate this high-risk, high-reward investment space. Let us now have a look at the best penny stocks in August 2024 on a 5Y CAGR basis.

Note: The stocks have been sorted based on 5Y CAGR and are as of August 21, 2024

Overview of 5 Best Penny Stocks

1. Remedium Lifecare Ltd: Remedium Lifecare Ltd. was founded in 1988 and is engaged in the trading of pharmaceutical products, including Advanced Pharmaceutical Intermediates. The company recently entered into a strategic agreement with Angel Partners, Ltd., UK, effective July 29, 2024, to acquire technology for manufacturing lithium carbonate in India. In addition, it signed an annual Supply Agreement with Alfa Chemicals and Solvents Ltd., Turkey.

Key Metrics:

• Return on Equity (ROE): 123%
• Return on Capital Employed (ROCE): 99.5%

2. Prakash Steelage Ltd: Incorporated in 1996, Prakash Steelage Ltd manufactures and exports stainless Steel tubes & pipes. On the operational front, the company, on a standalone basis, has recorded a net revenue of ₹9,657.20 Lakhs compared to ₹8,573.75 Lakhs in the previous year. The company has gained a net profit after tax ₹414.61 Lakhs as compared to the previous year’s net profit after tax of ₹16,350.41 Lakhs.

3. Standard Capital Markets Ltd: Incorporated in 1987, Standard Capital Markets Ltd. is involved in Non-banking Financial activities. Standard Capital Markets Limited has joined hands with Paisalo Digital Limited, a pioneering financial services company dedicated to enhancing financial inclusion in rural India. This investment underscores SCML’s commitment to upgrade innovative solutions that bridge the financial gap and promote economic growth in underserved regions.

Key Metrics:

• ROE: 6.88%
• ROCE: 8.18%

4. Integra Essentia Ltd: Incorporated in 2007, Integra Essentia Ltd is in the business of Life Essentials, viz., Food (Agro Products), Clothing (Textiles and Garments), Infrastructure and Energy. Integra Essentia recently secured a significant order valued at ₹280 million for its Agro and Infrastructure businesses. This order highlights the consistent trust and quality that its customers have in products and services.

Key Metrics:

• ROE: 16%
• ROCE: 17.2%

5. Sunshine Capital Ltd: Incorporated in 1989, Sunshine Capital Ltd is in the financing business, trading in shares, and investment activities. The company has recently become completely debt-free. This achievement has been made possible by raising funds through a preferential issue of equity shares. This strategic move has strengthened its financial position, providing a solid foundation for future growth and expansion

Key Metrics:

• ROE: 1.33%
• ROCE: 0.25%

Why Consider Penny Stocks?

1. Potential for High Returns: The most attractive feature of penny stocks is their potential for significant gains. Because they trade at such low prices, even a modest increase in value can result in impressive percentage returns.
2. Opportunity for Early Investment: Investing in penny stocks can give you a chance to invest in a company before it becomes widely recognised. If the company grows and becomes successful, early investors can reap substantial rewards.
3. Affordability: With their low price tags, penny stocks allow investors to buy large quantities of shares without requiring a significant capital outlay.

Risks to Watch Out For

1. Volatility and Liquidity: Penny stocks are notoriously volatile. Their prices can swing dramatically in short periods due to their low trading volumes and market manipulation. This volatility can result in quick, substantial losses if the market moves against you.
2. Lack of Transparency: Many penny stocks are traded on OTC markets, where regulatory oversight is less stringent. This lack of regulation can lead to a scarcity of reliable financial information, making it challenging to evaluate a company’s true value and stability.
3. Fraud and Manipulation: The low regulation and limited oversight make penny stocks susceptible to fraudulent schemes, such as “pump-and-dump” operations, where the stock’s price is artificially inflated through misleading promotions before insiders sell off their shares at a profit.
4. Financial Instability: Many companies behind penny stocks are in their early stages or struggling financially. Investing in these companies carries the risk of business failure, which can lead to a total loss of your investment.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.