• Banco BBVA Argentina (BBAR) – Positive 27% increase in net income in 2021 to mitigate the high inflation rate problem
• Good Times Restaurants (GTIM) – A share repurchase program is positive news for the undervalued stock
• Global Cord Blood (CO) – Strong third-quarter fiscal 2022 results are supportive of the stock price now

Penny stocks that trade for less than $5 are risky and investors may tend to avoid them. Not all companies and stocks are the same. There are investment opportunities with penny stocks offering huge potential to explore now at the end of 2022’s first quarter (Q1). The following stocks have been selected based on five main criteria focusing on growth, profitability, and valuation. These stocks are undervalued and have a strong balance sheet and growth prospects. There are too many stocks to choose from to invest in, but being picky means you are a sophisticated investor and you know what you are looking for. The potential for these three penny stocks are huge, enough to compensate for their riskiness.

The investment criteria used combined with the Finviz stock screener to choose these penny stocks to buy are the following:

1. EPS growth for the next 5-years: Higher than 25%
2. Debt/Equity: Less than 0.1
3. Price/earnings-to-growth (PEG) ratio: Less than 1
4. Net profit margin: Positive
5. Return on Equity: Positive

Hot Penny Stocks: Banco BBVA Argentina (BBAR)

Banco BBVA Argentina (NYSE:BBAR) is one of the leading private financial institutions in Argentina, a country that has a huge inflation rate problem. According to Focus Economics, “Inflation is expected to be 47.9% at the end of 2022.”

This bank stock is cheap with a price/earnings (P/E) ratio of 3.95 and its earnings next year are expected to rise by 65.31%. The good news about Banco BBVA Argentina is that its Q4 2021 financial results showed positive net income in real terms. The inflation-adjusted net income in Q4 ’21 was $4.8 billion, representing an impressive 1,008.8% increase compared to the net income of $430 million reported in Q4 of 2020. Turning to yearly results, inflation-adjusted net income in 2021 was $21.2 billion, or 27.1% higher than the $16.6 billion reported in 2020.

In 2021, Banco BBVA Argentina reported an inflation-adjusted average return on equity (ROAE) of 13.5%, which is undoubtedly a strong figure creating wealth for shareholders.

Good Times Restaurants (GTIM)

Good Times Restaurants (NASDAQ:GTIM) stock has a P/E ratio of 2.96 and a PEG ratio of only 0.1. Looking at its ROE, which stands at 61.7%, it is an exceptional figure. The company has a market capitalization of $47.6 million and its earnings in the next five years are expected to grow 30%.

For such a small company, there are two main factors to consider. First, a switch to profitability in 2021 from the previous four consecutive years of net losses indicates an inflection point in its business. Second, the decision to implement a share repurchase program is a positive factor, signaling management’s confidence about future business prospects and also supporting the case that GTIM is an undervalued stock.

The share repurchase program is also good news for the valuation of GTIM stock as it reduces the number of shares outstanding.

Hot Penny Stocks: Global Cord Blood (CO)

Global Cord Blood (NYSE:CO) provides cord blood processing and storage services in China. Its shares rallied 15% in Feb. 2022 on news of the potential to cure HIV. The shares have declined since, now looking more attractive while trading at $3.99 per share.

The firm reported strong Q3 fiscal year 2022 results in late Feb. 2022. They reported a year-over-year increase of 9.1% for revenue and an expansion of gross margin to 85.1% compared to 84.6% in the prior-year period. They reported an operating margin increase of 47.2% versus 42.6% in the prior-year period and a year-over-year 15.1% increase in net income, as well.

The P/E of 5.92 is too low and so is its PEG ratio of 0.19. With its EPS expected to rise 30% in the next five years and a profit margin of 42%, CO stock is a penny stock that could deliver strong gains in 2022.

On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks. 

Read More: Penny Stocks — How to Profit Without Getting Scammed 

On the date of publication, Stavros Georgiadis, CFA  did not have (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.