5 Best Penny Stocks in Canada

In the ever-evolving landscape of the Canadian stock market, penny stocks have long captured the imagination of investors seeking high-risk, high-reward opportunities. As we kick off another month, the hunt for the next best penny stock continues.

In this article, we’ll present you with the five best penny stocks in Canada for 2023. From oil companies to cannabis retailers, these five stocks have the potential to make waves in the Canadian market.

2. Athabasca Oil Corporation 

Symbol: ATH.TO
Exchange: TSX
Price: $4.16
52-wk high: $4.40
52-wk low: $2.01
Market Cap: $2.419B

The second penny stock on our list is Athabasca Oil Corporation (ATH.TO). It demonstrates a commendable recovery in revenue and profits, backed by a strengthening balance sheet. Here’s why we picked it:

• Revenue and profit recovery: The company showed a sharp recovery in revenue, growing from $464,648 in 2019 to $1,504,685 in 2022. Additionally, the company turned around a net loss of $-657,525 in 2019 to a substantial net income of $572,271 in 2021.
• Strengthened balance sheet: Between 2020 and 2022, the company increased its total assets from $1,425,984 to $2,230,354. Over the same period, total debt decreased from $559,498 to $206,133, indicating a move towards a healthier capital structure.
• Positive operating cash flow: The company has consistently maintained positive operating cash flows, indicating its operational efficiency. In 2022, it was at $315,618 compared to a low of $-22,910 in 2019.

Concerns:

• Volatile operating income and unusual items: The company’s operating income showed volatility with a dip in 2019 and again in 2022. In addition, the presence of substantial unusual items in the income statement in multiple years can distort the true operational performance.
• Decline in working capital: The working capital decreased from $284,325 in 2019 to $82,139 in 2022, which might raise concerns about short-term liquidity and the company’s ability to cover its short-term obligations.
• High capital expenditures: The company’s capital expenditure was consistently high, standing at $-147,449 in 2022, indicating potential overcapitalization or heavy investments in assets, which can strain the company’s cash reserves.

3. Cronos Group Inc.

Symbol: CRON.TO
Exchange: TSX
Price: $2.45
52-wk high: $4.88
52-wk low: $2.15
Market Cap: $933.668M

The third penny stock on our list is Cronos Group Inc. (CRON.TO). It has demonstrated the ability to manage expectations around its earnings per share, consistently beating analyst estimates over the provided quarters. However, there are concerns around its top-line growth and profitability. Here’s why we picked it:

• Overall bullish trend: A majority of the moving averages, both short-term (like EMA10 and SMA10) and long-term (like EMA200 and SMA200), are indicating a buy.
• Long-term strength: The longer-term moving averages (SMA100, EMA100, SMA200, and EMA200) all signal a buy, suggesting that the stock has been performing well in the medium to long term.
• Consistent EPS Beats: For both June 2023 and March 2023, CRON.TO managed to outperform EPS expectations by 43.81% and 40.17% respectively. This shows that it’s been able to control expenses or generate unexpected non-operational income, leading to higher earnings per share.
• Improvement in revenue miss: While they missed revenue expectations in earlier quarters, the degree of the miss was smaller in June (-14.68%) compared to March (-19.12%). This indicates they may be working towards bridging the gap between expected and actual revenues.

Concerns:

• Declining revenues quarter-over-quarter: The company reported $25.45M in revenue for June 2023, down from $26.91M in March 2023, indicating a sequential decline in revenues.
• Negative EPS: Despite the beats, the EPS values for both periods are negative, which suggests the company is not profitable at the moment.

4. High Tide Inc.

Symbol: HITI
Exchange: TSX
Price: US$1.46*
52-wk high: US$2.30
52-wk low: US$1.03
Market Cap: US$110.366M

The fourth penny stock on our list is Calgary’s High Tide Inc., a cannabis retailer with stores in Alberta, Manitoba, Ontario, and Saskatchewan. The company’s stores feature the Canna Cabana, KushBar, Meta Cannabis Co, NewLeaf Cannabis, and Meta Cannabis Supply Co. banners. High Tide Inc. has reported impressive numbers in terms of revenue growth, free cash flow, and adjusted EBITDA. Its presence in the retail market with 156 locations and the consistent growth in the Cabana ELITE membership is noteworthy. Here’s why we picked it:

• Positive financial performance: High Tide Inc. achieved a free cash flow of $4.1 million this quarter, ahead of its previously stated goal.
• 14th consecutive quarter of positive-adjusted EBITDA: Achieved an adjusted EBITDA of $10.2 million, up 140% year-over-year and 55% sequentially.
• Revenue growth: Achieved a revenue of $124.4 million, up 30% year over year.
• Strong retail and membership presence: Reported a 19% year-over-year and 8% sequential increase in same-store sales.
• Growth in membership programs: The Cabana ELITE paid membership program has grown to more than 18,800 members, a 39% increase from Q2.
• Favourable technical indicators: EMA Convergence of EMA200 and EMA50. When these values are close, it suggests a potential shift in the stock’s trend.

Concerns:

• Net Loss: Reported a net loss of ($3.6) million for the quarter despite robust revenue growth.

5. Corus Entertainment Inc.

Symbol: (CJR-B.TO)
Exchange: TSX
Price: $0.89
52-wk high: $2.48
52-wk low: $0.84
Market Cap: $177.502M

The fifth and final penny stock on our list to buy for 2023 is Corus Entertainment Inc. (CJR-B.TO). Here’s why we picked it:

• Oversold indicators: Both the Money Flow 14 (score of 3.63) and the RSI14 (at 23.65) indicate that the stock is in the oversold territory. This could mean that the stock has been sold excessively and might be due for a price rebound, which can be an attractive entry point for contrarian investors.
• Stable gross profit: Over the years, the company’s gross profit has remained relatively stable, ranging from $855,236 thousand in the trailing 12 months to $965,864 in August 2020. This consistency in gross profit suggests it can maintain a relatively stable top-line and manage its cost of revenue.

Concerns:

• Net income volatility: The company went from a net income of $172,550 thousand in August 2021 to a significant loss of $846,201 in the trailing 12 months. This shows high volatility in its bottom line.
• Increasing operating expenses: The company’s total operating expenses have been on the rise from 2020 to 2022, which could indicate inefficiencies or expanded operations that have not yet translated into profits.
• Negative EPS in 2022: The company had a diluted EPS of -1.19 in August 2022, down from 0.83 in August 201. This is a considerable decline and signals decreasing profitability for shareholders.

*As of closing time on October 25, 2023

Keep in mind that not all penny stocks have revenue or produce positive cash flow. When evaluating penny stocks to buy, it’s different than evaluating large cap stocks because they’ll have a longer track record and can be easier to compare with one another.

Penny stocks are stocks typically traded at less than $1 each, although many investors consider stocks that trade for less than $5 apiece to be penny stocks. Most companies whose shares trade at less than $5 each aren’t usually well known. They’re often small companies in terms of market capitalization and don’t have a lot of trade volume. However, there are some exceptions to the rule.

Why are penny stocks so cheap? Generally because they’re from companies that are small or unproven. The prospect of long-term success is questionable, and therefore their stocks are riskier and cheaper than more robust companies. Their cheap price is the reason why many scammers use them as a way to lure unsuspecting investors. So, it’s important to be careful and invest in only those stocks which are listed on well-known exchanges and have a good reputation.

Penny stocks usually trade below $5 each, while regular stocks trade for $5 or more. Regular stocks also tend to trade on larger exchanges such as the TSX, NYSE, and Nasdaq. They rarely trade on small exchanges.

Penny stocks may have higher volume than regular stocks. For instance, it’s common to see penny stocks among the top 10 most active stocks on the TSX on any given day. However, some of the less popular penny stocks don’t have a large trading volume or may have no volume for many days in a row.

Depending on what exchange a stock trades, the listing requirements vary. For instance, the disclosure requirements and corporate governance requirements for TSX-listed companies are stricter than those listed on the TSX Venture Exchange. Companies listed on the NYSE and Nasdaq also face a lot more regulation than they would if they traded on other exchanges. Even firms that trade on the OTCBB have to file financial statements with the Securities and Exchange Commission (SEC ). However, companies listed on the Pink Sheets don’t have to make SEC filings.

Like other traders, those that trade penny stocks may be in it for the short-term or long-term investors. Because penny stocks can be a lot more volatile, there’s the opportunity to make large sums of money in a shorter period of time. There’s also the potential to lose a lot of money very quickly, too. Which investment is right for you – penny or regular stocks – depends on several factors including pricing, volatility, risk and research.

It is easier to get into investing with penny stocks as they are often far less expensive than regular stocks. You can get started with just a few hundred dollars.

Nano or micro-cap stocks are forms of penny stocks that are differentiated by the size of their market capitalization, often referred to as market cap. Market cap is the total worth of a company and is calculated by multiplying the outstanding shares by the current price of those shares. It generally corresponds to where a company is in terms of growth. Larger cap stocks are generally less risky but may also offer less return.

Nano-cap stocks usually have a market cap of less than $50 million but that number can vary slightly depending on the analyst discussing it. Micro-cap stocks have a slightly larger and generally have a market cap of between $50 million and $300 million.

You can buy penny stocks on a number of different exchanges. In Canada, penny stocks trade on the Toronto Stock Exchange (TSX), TSX Venture Exchange, Canadian Securities Exchange, and NEO Exchange. In the U.S., they trade on the New York Stock Exchange (NYSE), Nasdaq, the Over-The-Counter Bulletin Board (OTCBB), and Pink Sheets.

While penny stocks do trade on larger exchanges like the TSX and NYSE, they’re usually associated with smaller and lesser-known exchanges. When a Canadian publicly traded company grows large enough, it typically graduates by moving to the TSX from the TSX Venture Exchange. The TSX Venture Exchange was previously known as the Canadian Venture Exchange (CVE) and the exchange will be listed by it’s short form CVE in stock searches. A company will move to the TSX to increase liquidity, to improve the chances of receiving analyst coverage, and to raise its profile among small and large investors.

To trade penny stocks, you need to have an online brokerage account. You’ll likely want to use a broker that charges a low commission or no commission at all since fees will eat into your overall returns. You’ll also want a brokerage that offers real-time quotes as the price of penny stocks can fluctuate wildly throughout the trading day.

Penny stocks aren’t ideal for those who are new to investing in the stock market. They may have low trading volume, which means they can be difficult to sell. Penny stocks can also be quite volatile, as an increase or decrease of 10% or more in a day isn’t unlikely.

If you want to invest in penny stocks, they should make up a small portion of your portfolio. It’s best only to invest an amount you can afford to lose.

In addition, you shouldn’t be investing a large chunk of your retirement savings in penny stocks.

Because of their volatility, penny stocks are considered a far riskier investment than regular stocks. Because most penny stocks are highly speculative, even a minor piece of news can quickly impact the stock price. This usually doesn’t happen with regular stocks.

Penny stocks are often quite volatile and can rise or fall in value by a large percentage in a single day. A $1 decrease for a $100 stock is a 1% loss, while a $1 decrease for a $2 stock is a 50% loss.

As well, some companies may be dependent on a few customers or one product. That can leave them susceptible to a drop in business if one of those customers leaves or a competitor releases a better product. And penny stocks are easy to manipulate by other investors or employees. Some may be promoting stocks in newsletters and on social media, passing it off as investment advice and hoping others will buy. As the stock rises, the promoters get out before the stock drops. In other cases, fraud isn’t off the table, and investors may hold on until it’s too late. That’s what happened to Bre-X investors in 1997.

Before you decide whether to invest in penny stocks or regular stocks, know your appetite for volatility and your ability to absorb a loss. Penny stocks are usually priced low for a reason. The company selling them may be facing financial, legal, or reputation-related issues. But it could also be a new company looking to finance growth potential or an established company that has had some troubles and has a potential to rebound. The trick is to find out which applies to the company you want to invest in.

As with any stock purchase, do your due diligence and find out what you can about the company before you buy a piece of it. Penny stocks can be more challenging to research than regular stocks. These are stocks usually associated with smaller companies so there may not be a website and if they are new – and many are – there may not be historical data you can use. If penny stocks are traded on the main stock exchanges, such as the TSE, they have to follow exchange rules and will provide minimal information.

To safely invest in penny stocks in Canada, you will first have to figure out your investment goals. Are you in it for the short run or the long run?

For long-term investors, it is best to look for penny stocks that offer consistent growth over many years and are less volatile. You could also create a balanced portfolio of penny stocks from several different industries rather than sticking to one or two. The best penny stocks in Canada are those that perform well over longer periods of 3-5 years. So be sure to check their historical performance before making an investment.

For short-term investors, it is best to look for which industries or sectors are trending at the moment and invest accordingly. Keep in mind that short-term investments are riskier and therefore using disposable capital (not your hard-earned savings) is recommended.

It is always wise to speak to your trusted financial advisor or service before making any decisions.

That depends entirely on the penny stocks you invest in, when you invest and when you exit. Therefore, it’s important to do your research on the best penny stocks in Canada, checking their performance over three to five years before investing. If market conditions are in your favour, you may be able to double your investment capital within a year. But as with all investments, penny stocks are prone to risks. So, there is no guarantee that penny stocks will give you the returns you are looking for.

Finding good investments of any kind takes time and effort. However, finding good penny stocks can be even more difficult. Be wary of salespeople or stock promoters who try to sell you the next greatest penny stock. They often exaggerate or overstate the company’s potential and may also attempt to push you into buying quickly before you have enough time to assess the purchase. Similarly, you should avoid buying a stock because your friend, co-worker or relative heard that it would be an amazing buy.

That said, there are a few methods you can use to find penny stocks. Penny stocks are promoted via various investor and market sites as well as on sites such as Reddit and news sites. Even financial magazines often make it a point to do periodic articles listing available penny stocks they consider to be good investments. You can also find penny stocks by searching through the TSE lists for stocks trading at less than $5 per share.

Start by researching penny stock lists and the companies on those lists. The more information you can gather, the higher the probability that you will make a good investment. And remember that wherever you choose to start, be sure the site is legitimate and confirm the information you get with another equally reputable source.