Best Penny Stocks With High Net Profit Margin – Hidden Gems?
Best Penny Stocks with High Net Profit Margin: From time to time we come across penny stocks which soared 500%, even 1,000% in value making their investors richer.
Such companies score better than their peers on key metrics such as return on equity, profit margins, etc. This enables them to earn higher profits than their small peers.
Such growth on a small base brings multi-bagger stock returns to investors. In this article, we will look at some best penny stocks with high net profit margins which you can add to your watchlist.
Best Penny Stocks with High Net Profit Margin
For our study of ‘best penny stocks with high profit margin’, we’ll read about 5 different companies, analyzing their business models. In the process, we’ll also learn about key points regarding their businesses and financials. A list at the end of this article compiles more such stocks.
Best Penny Stocks with High Net Profit Margin #1 – Swadeshi Polytex
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹47 | Market Cap (Cr.) | ₹187.32 |
| EPS | ₹9 | Stock P/E | 5 |
| RoE | 389% | RoCE | 482% |
| Promoter Holding | 66% | Book Value | ₹7 |
| Debt to Equity | 0.00 | Price to Book Value | 6.00 |
| Net Profit Margin | 78.6% | Operating Margin | 92.0% |
Established in 1970, Swadeshi Polytex is engaged in the business of buying, holding, selling, leasing, sub-leasing, renting, and development of various kinds of real estate properties.
The company’s expertise lies in handling projects for land, plot, building, warehouses, and factories for residential, commercial, agricultural, industrial, rural, and urban segments. It is based out of Ghaziabad, Uttar Pradesh.
Swadeshi Polytex has a suitable promoter holding of 66.38% according to the June 2023 shareholding pattern. It earned a net profit of Rs 35 crore on sales of Rs 44 crore in FY23 making it a penny stock with high net profit margin of 78.6%
Furthermore, it is a debt-free stock with an attractive P/E ratio of 5 and price to book value ratio of 6. Barring FY21, its net profit has continuously increased in the previous five years from Rs 8 crore in FY19 to Rs 35 crore in FY23.
Best Penny Stocks with High Net Profit Margin #2 – Avonmore Capital & Management Services
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹91.25 | Market Cap (Cr.) | ₹215.69 |
| EPS | ₹49 | Stock P/E | 1.87 |
| RoE | 48% | RoCE | 60% |
| Promoter Holding | 68.9 | Book Value | ₹118 |
| Debt to Equity | 0.10 | Price to Book Value | 0.66 |
| Net Profit Margin | 57.6% | Operating Margin | 66.9% |
Founded in 1992, Avonmore Capital is micro cap company in the financial services industry. It has business interests in handling debt & equity market instruments, business consultancy & advisory services, loan syndication, wealth management, and healthcare.
Its expertise lies in finding scalable business opportunities, offering financing & management services, owning equity & acting as a promoter, and exiting at a later stage of business.
As a part of its portfolio, Avonmore owns the largest distillery in Himachal Pradesh with a production capacity of 85 KLPD ENA and 35KLPD Ethanol.
Furthermore, through its subsidiary in the infrastructure industry, it provides consultancy services for the development of roads, bridges, highways & tunnels, smart cities, urban infrastructure, water & wastewater, tourism, metro, and more.
In addition to all this, it also operates super-specialised eye care centres in the Delhi NCR region offering treatments such as cataract, cornea, retinal, glaucoma, and more.
Avonmore Capital and Management Services earned a net profit of Rs 122 crore on sales of Rs 211 crore. It has a market capitalization of Rs 183 crore giving it a P/E ratio of 1.8. It is a penny stock with a high net profit margin of 57.6%.
Best Penny Stocks with High Net Profit Margin #3 – Mercantile Ventures
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹18.6 | Market Cap (Cr.) | ₹211 |
| EPS | ₹1 | Stock P/E | 13.27 |
| RoE | 5% | RoCE | 3% |
| Promoter Holding | 73% | Book Value | ₹30 |
| Debt to Equity | 0.01 | Price to Book Value | 0.64 |
| Net Profit Margin | 33.8% | Operating Margin | 7.1% |
Formerly known as MCC Finance, Mercantile Ventures is a micro-cap real estate company involved in the resale and leasing of immovable properties of various types. It was previously engaged in the financial services business as an NBFC.
In addition to resale and leasing activities, Mercantile also provides property management, manpower and security services to various clients. It engages in investment activities if the management comes across an attractive opportunity.
As a feather in its cap, Mercantile Ventures has a high promoter holding of 73%. The stock offers a high net profit margin of 33.8%. With earnings per share of Rs 1, it presently trades at a P/E 14, giving a market capitalization of Rs 211 to the company.
Barring FY17, Mercantile Ventures has been consistently profitable in the last ten fiscals. It recorded a net profit of Rs 17 crore in FY23 on a revenue of Rs 47 crore. Furthermore, it is a debt-free stock with a negligible debt-to-equity ratio of 0.01.
Best Penny Stocks with High Net Profit Margin #4 – Zenotech Laboratories
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹53 | Market Cap (Cr.) | ₹330 |
| EPS | ₹2 | Stock P/E | 38 |
| RoE | 15% | RoCE | 18% |
| Promoter Holding | 69% | Book Value | ₹14 |
| Debt to Equity | 0.00 | Price to Book Value | 4.23 |
| Net Profit Margin | 27.3% | Operating Margin | 48.8% |
Based out of Hyderabad, Telangana, Zenotech Laboratories is engaged in the production and marketing of pharmaceutical products. It operates in the areas of oncology, biotechnology and general injectables.
Zenotech has a biotech API production site which it has leased to the pharmaceutical giant Sun Pharmaceuticals. This coupled with its contract manufacturing business helps Zenotech to post high profit margins.
Furthermore, in recent years, the pharma player has been focusing on depot formulations and the oral solid dosage (OSD) market. Along these lines, it has commissioned two facilities for the expansion of its operations.
Zenotech earned a net profit of Rs 11.59 crore on revenues of Rs 42.42 crore in FY23 giving making it a penny stock with a high-profit margin of 27.3%. The stock currently trades at a slightly expensive P/E of 35 and P/B of 4.23.
Best Penny Stocks with High Net Profit Margin #5 – PTL Enterprises
| Particulars | Amount | Particulars | Amount |
|---|---|---|---|
| CMP | ₹34 | Market Cap (Cr.) | ₹447 |
| EPS | ₹2 | Stock P/E | 19 |
| RoE | 4% | RoCE | 9% |
| Promoter Holding | 70% | Book Value | ₹53 |
| Debt to Equity | 0.04 | Price to Book Value | 0.65 |
| Net Profit Margin | 36.2% | Operating Margin | 90.0% |
Set up in 1959, PTL Enterprises is a micro-cap company. The company owns a tyre and tubes manufacturing plant in Kalamassery of Kerala. The leading tyres manufacturer Apollo Tyres has taken the company’s facility on lease for long-term usage making PTL an associate company of Apollo Tyres.
The operations of the plant are managed by Apollo resulting in a fixed, consistent revenue from the tyres giant. PTL’s facility produces cross-ply tyres for trucks and buses. Its products are sold under the’ Apollo’ brand in India and foreign countries.
PTL Enterprises has a high promoter holding of 69.82%. Furthermore, it is a dividend-paying penny stock with a high dividend payout ratio of 100% and 80% in FY23 and FY22. As a leasing company, it earned a net profit of Rs 23 crore on sales of Rs 64 crore making it a penny stock with high net profit margin of 36.2%.
The company has consistently delivered profits for more than 10 years to its shareholders. Its stock presently trades at a P/E of 19 giving it a market capitalization of Rs 447 crore.
List of Best Penny Stocks with High Net Profit Margin
| Company Name | CMP | Market Cap (Cr) | Net Profit Margin | Industry |
|---|---|---|---|---|
| Swadeshi Polytex | ₹47 | 187.32 | 79% | Real Estate |
| Avonmore Capital & Management Serv. | ₹90 | ₹215.69 | 58% | Financial Services |
| PTL Enterprises | ₹34 | ₹449 | 36% | Tyres |
| Mercantile Ventures | ₹19 | ₹211 | 34% | Commercial Services |
| Advani Hotels & Resorts (India) | ₹81 | ₹414 | 29% | Hospitality |
| Zenotech Laboratories | ₹53 | ₹339 | 27% | Pharmaceuticals |
| DRC Systems India | ₹40 | ₹185 | 26% | IT |
| Mufin Green Finance | ₹44 | ₹652 | 23% | Financial Services |
What are penny stocks?
Penny stocks are micro cap companies with a market capitalization of less than Rs 1,000 crore. Their shares usually trade under Rs 100. Shares of such companies display low trading volume and are subject to high volatility.
Penny stocks can move up or down as much as 10% or even more (depending on their circuit limits) in a single day.
While penny stocks can result in multi bagger returns for investors, they are also prone to various pump-and-dump schemes. Furthermore, due to a lack of good corporate governance, they are more likely to report fraud and scams.
The smaller size also puts them at risk of macroeconomic and industry headwinds. Therefore, investors must exercise extreme caution while investing in penny stocks.
Conclusion
As we conclude our article on ‘penny stocks with high profit margin’ we can say that some business models have the benefit of higher profit margins.
But, investors should not look at profit margins and turn a blind eye to other metrics. Sales frequency, which is measured by inventory turnover should also be tracked along with margins.
Thus we can have two types of businesses: high sales volume & low margins and low sales volume & high margins. And if you are lucky, you may also find high sales volume with high margins. Which types of stocks would you prefer? How about we continue this conversation in the comments below?
Written By Vikalp Mishra
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The content in this article is not investment advice. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
