The 3 Most Undervalued Penny Stocks to Buy in September 2023

Stocks to buy

Undervalued penny stocks offer savvy investors the chance to secure substantial gains. As we continue through September 2023 (where did the month go?), the penny stock arena remains filled with hidden gems trading at tremendously discounted levels. Snapping up the most undervalued penny stocks now positions you to reap massive rewards when their prices reconnect with their underlying fundamentals.

Many high-quality penny stocks have been unjustly punished amid last year’s market turmoil. This year, sentiment has turned more positive, but certain penny stocks have still faced indiscriminate selling. Many investors still ignore these companies’ strong fundamentals and growth trajectories.

Once macroeconomic headwinds fade, I believe such undervalued penny stocks will rapidly regain their lost ground. Their tiny market caps allow them to soar much higher in a bull market compared to larger stocks. While risks are higher with penny stocks, the rewards can be exponentially greater as well.

With that said, here are three top-notch penny stocks to consider buying in September!

Owlet (OWLT)

Source: Monkey Business Images / Shutterstock.com

Owlet (NYSE:OWLT) has been languishing for quite some time now, but I believe the stock has likely reached a bottom in recent months, as it has been slowly creeping higher. This promising health data company centered on empowering parents saw its stock decline substantially in the last two years amidst the overall market selloff. However, this negativity has taken Owlet’s stock price to irrational lows, presenting a compelling buying opportunity.

Despite the stock’s poor performance, Owlet’s underlying business remains strong. The company empowers parents with real-time data and insights to help families care for their children. Its flagship product is the Smart Sock baby monitor that tracks a baby’s oxygen levels, heart rate, and sleep trends. Additionally, Owlet has rolled out a connected app, providing sleep and nursing alerts, along with other analytics.

While the health data company is expected to recover tremendously after this year’s decline, the current stock price fails to reflect Owlet’s rosy growth trajectory after this year’s decline. Analysts are forecasting 55% year-over-year revenue growth in 2024 to $87.3 million, followed by nearly 30% year-over-year growth through 2027.

That said, at its current price of roughly $3.80 per share, Owlet gives investors the opportunity to get in early before the company returns to consistent profitability and substantially higher valuations. The market has lost sight of Owlet’s long-term potential, providing a rare chance to grab this promising connected health player at a massive discount. Accordingly, the consensus price target of $15 implies 311% upside potential over the next year.

S&W Seed Company (SANW)

Source: Shutterstock

Although S&W Seed Company’s (NASDAQ:SANW) stock has been steadily declining for quite some time now, I believe this penny stock is finally approaching a bottom. This agricultural seed breeding and production company has fallen on hard times, with its stock price collapsing from over $3 in mid-2021 to below $1 currently.

However, with the penny stock trading at a forward price-earnings ratio of just 2-times 2023 estimates, I believe much of the negativity is already priced in. It’s true that S&W Seed is expected to remain unprofitable next year as the company continues to struggle operationally. However, analysts forecast an impressive 35% year-over-year jump in revenues for fiscal 2024, which would significantly boost gross margins and profitability.

Beyond next year, S&W Seed’s growth trajectory appears quite strong. This makes the stock’s forward price-to-sales ratio of only 0.37-times seem too cheap. While this company has clearly executed poorly in recent years, I believe the stock’s rock-bottom valuation fully reflects these struggles.

At under $1 per share, S&W Seed’s nearly 100-year operating history in the $61 billion-plus global seed industry offers upside that massively outweighs the downside risks. If management can turn operations around and return to consistent growth, the penny stock could soar back toward the $3 level in short order. This favorable risk-reward asymmetry makes S&W Seed a compelling contrarian bet at current prices. The consensus upside potential here is 267%.

Redwire (RDW)

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Redwire (NYSE:RDW) currently trades 75% below its peak price, but this rapidly growing space infrastructure company could be poised for a massive rebound. While the overall young space industry has been out of favor amidst surging interest rates, Redwire maintains vital competitive advantages that set it up nicely for the long term.

The company aims to deliver reliable, economical spacecraft infrastructure for the next generation economy in space. It offers crucial in-space 3D printing technology, high-efficiency solar arrays, sensors, and various other mission-critical components.

Despite the challenging market environment, Redwire continues posting strong revenue growth above 63% year-over-year. And with the global space economy projected to exceed $1 trillion in the next decade, Redwire’s total addressable market is absolutely massive.

While space stocks have been crushed during the risk-off selling, I believe Redwire still deserves a premium valuation, given its exposure to one of the most promising and rapidly expanding industries.

Penny Stocks

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, Omor Ibne Ehsan 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.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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