Cheap OTC penny stocks (those that trade on the Over-the-Counter exchange) have the potential to provide game-changing returns, or break your portfolio. These are some of the most high-risk, high-reward investments you can make. The potential for colossal gains is undoubtedly alluring, but it’s a double-edged sword. These stocks typically trade with very low volume, and rapid moves are possible either to the upside or the downside due to the thin order book behind these names.
That said, having some OTC penny stocks in your portfolio is not a bad idea at all. That’s as long as you manage your position sizing well. A well-diversified portfolio can accommodate a small allocation to these high-risk, high-reward plays.
If any of these companies land big contracts and take off in the coming years, they could deliver massive upside potential and turn your small investment into something meaningful. Here are three cheap OTC penny stocks to consider right now.
Blackline Safety (BLKLF)
Blackline Safety (OTCMKTS:BLKLF) provides wearable safety technology, personal and area gas monitoring, cloud-connected software, and data analytics. This stock has been on the rebound since late-2022, and while this rebound has stalled a little, I think this company has significant upside potential in the coming years.
Its Q1 results were a mixed bag, but I remain optimistic about Blackline’s long-term trajectory. Missing earnings per share estimates by 2 cents was disappointing, but we can’t overlook the company’s 25% year-over-year growth in total revenue. And with annual recurring income climbing a tremendous 37% to $54.2 million, Blackline’s subscription-based business model is clearly performing very well.
The company reported a record 130% rate of growth in revenue from existing customers. When current clients are more than doubling their spending on the company’s offerings, that shows powerful validation from the market. Blackline’s connected safety solutions are resonating well across key industries like energy and utilities.
While the company’s $3.2 million adjusted loss is still sizable, it’s nearly halved from the previous year. I wouldn’t be shocked if Blackline reaches profitability ahead of expectations.
The company needs to keep up the momentum and break even, but could be a big winner for investors looking for OTC penny stocks to buy.
Payfare (PYFRF)
Payfare (OTCMKTS:PYFRF) continues to see serious momentum build. This fintech stock has remained rangebound over the past few years, but its fundamentals are improving. In Q1, revenue increased by 23% year-over-year to $51.9 million. Active users also jumped 26% to exceed 1.4 million total, while gross dollar value increased 33% to $3.5 billion.
These performance indicators show a customer base that is coming to rely more on Payfare’s services. With significant new partnerships achieved, such as Uber’s (NYSE:UBER) Pro Card and an unnamed major retailer, I believe this upward trajectory will continue. Adjusted EBITDA nearly doubled to $6 million as well, and Payfare’s earnings trend also looks promising.
With a forward price-to-earnings ratio still at 28-times and no debt, this company has considerable upside from current levels. Analysts expect top-line growth to remain around 30% annually going forward.
Expert.ai (EXSPF)
Expert.ai (OTCMKTS:EXSPF) is an AI software company that develops products using natural language processing algorithms. The company’s flagship product is the Expert.ai Platform, which understands written language and extracts strategic information for businesses. This is one of the more volatile AI stocks you can buy right now. But it’s also one of the best ways to play this mega-trend, if it continues.
This company releases reports every two quarters. Expert.ai’s “half-year” 2023 performance shows revenues ended up declining by 5% year-over-year to €13.1 million. However, losses narrowed substantially, and analysts expect full-year revenue growth to come in at 8.5% and continue growing around 14% annually in the coming years. This stock is far from a sure bet right now. But if Expert.ai manages to beat expectations and see outsized growth driven by AI tailwinds, we could see a massive rebound.
I expect multi-bagger potential on the horizon, if this AI company can meet expectations.
On the date of publication, Omor Ibne Ehsan 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.