Undervalued Gems: 3 Penny Stocks Hitting 52-Week Lows. Time to Take a Look?

Recently, we covered two versions of mid-cap stocks and small-cap stocks hitting 52-week lows.

In today’s article, we’ll cover penny stocks that are hitting or nearing their 52-week lows.

Penny stocks are typically stocks of small companies that trade at a low price per share. While there’s no general definition, companies with a low marketcap and which trade at a price below ₹100 are considered penny stocks.

Here are five that have recently hit their52-week lows.

#1 PBM Polytex

First on the list of penny stocks hitting a 52-week low is textile company PBM Polytex.

The company is involved in the manufacturing and processing of yarn. It produces high quality grey 100% combed cotton yarn.

The company’s manufacturing facilities are located in the Anand district of Gujarat and in Madhya Pradesh. It also has a couple of windmills in Gujarat.

In 2023 so far, the company has had a tepid outing with its shares falling 20%. If we look at yearly performance, the performance is even worse with a 35% decline.

PBM Polytex share price is currently trading at its 52-week low.

In the recent past, the textile sector has seen its fair share of problems including elevated raw material prices, Russia-Ukraine war and subdued capacity utilization.

As things stand now, the demand scenario appears bleak owing to a looming global recession in the US and Europe.

Going forward, textile stocks are expected to make a comeback as domestic demand comes back and prices stabilize.

For PBM Polytex, the shift has already started as it was able to bring down operational costs in the March 2023 quarter.

The company is almost debt free and it also pays out good dividends. At the current price, the dividend yield comes to around 4%.

A key monitorable will be the company’s exports, which contribute around 35-40% to revenue.

#2 Wardwizard Innovations & Mobility

Next on the list is Wardwizard Innovations & Mobility.

The company was listed on the exchanges in 2015. It focuses on providing clean and greener alternatives through two of its brands - Joy E-Bikes and Vyom Innovations.

Under its flagship brand, Joy e-bikes, the company sells more than 10 varieties of electric bicycles. It also manufactures consumer appliances from LED TVs to Alkaline water purifiers and air purifiers, to hydrogen water bottles under the brand 'Vyom'.

Even though it operates in the hot and emerging electric vehicle (EV) sector, shares of the company are currently trading near their 52-week low.

A detailed study of the company's past history will show you that it has some great competitive advantages, and it has enjoyed superior return ratios for a couple of years.

Even if we look at its growth prospects, the company is on an expansion mode across India. It inaugurated a state-of-the-art plant at Vadodara, Gujarat in January 2021. It's capable of producing about 400,000 electric two-wheelers per annum.

It has acquired 4 million sq. ft. of land to develop India's first-ever EV ancillary cluster in Vadodara, Gujarat. About 20 major EV parts/ components will be manufactured in the Wardwizard EV ancillary cluster.

Besides this, the company is planning to expand its dealer network.

The company also turned profitable in the financial year 2021 and has since reported strong numbers. For the financial year 2022, the company reported revenue growth of 370% YoY and profit growth of 300% YoY.

It also hasno debt on its books.

While the company has got high growth prospects, its sudden growth makes one wonder whether it will be able to continue this run rate in the future.

The stock currently trades at more than 20 times its book value and at a PE multiple of more than 100x.

If the company is not able to maintain its high growth rate which it registered in the last two years, not only does its earnings suffer but the high PE multiple also contracts, thus leading to a double whammy.

#3 PNB Gilts

Third on this list is PNB Gilts.

The company plays a crucial role in India's debt ecosystem. The company's core business revolves around government securities (G-secs) or gilts as it is known.

G-secs or gilts are issued by the Reserve Bank of India (RBI) on behalf of the government. As the issue size of these securities ranges between ₹150-180 bn, there exists a huge market for underwriters.

The company is a wholly owned subsidiary of Punjab National Bank (PNB). It is engaged in the business of underwriting g-secs or gilts.

PNB Gilts is the only underwriter listed on the Indian stock exchanges. The company boasts of strong and robust financials.

The company has also been generous in sharing its profits with shareholders. It has a history of rewarding shareholders with dividends every year.

Despite all this, shares of the company have struggled in the past one year.

The weak show could be attributed to its performance for the nine months ended December 2022. On the back of rising interest rates, the company reported a loss for the nine month period. It also incurred trading losses of around ₹2.9 bn due to unfavorable market conditions.

Given that it’s a wholly owned subsidiary of PNB, it continues to enjoy group synergies and can always reach out to PNB for its liquidity needs.

In conclusion

Investors must keep a watchful eye on stocks trading at their 52-week lows.

It may seem like an opportunity for potential outsized returns. However, it's crucial to adopt a comprehensive approach and consider multiple factors before making investment decisions.

Market conditions play a significant role in the performance of a company. Industry trends and other economic factors can impact a company's performance in ways that are difficult to predict.

Therefore, it's imperative to carefully evaluate the fundamentals of each company before making any investment decisions that align with one's risk tolerance and investment goals.

Happy Investing!

Disclaimer:This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com