6 penny stocks with solid growth and zero debt

After all, who doesn’t love buying a stock as cheap as below ₹50 And when he has doubled or tripled the money, sell it.

Piggy Bank Those who have a good balance sheet, low or zero debt and a track record of paying dividends can outperform their peers.

Such companies are eligible to be part of your watch list.

Let’s take a look at the top six penny stocks that meet all the criteria mentioned above.

#1 NBCC (India) Limited

NBCC (India) operates in three major segments – Project Management Consultancy, Real Estate, and Engineering Procurement & Construction.

It is a PSU holding 61.75% stake with the Government of India as of June 2021.

NBCC, which has a wide footprint in civil construction, residential and commercial projects including redevelopment of government colonies, had reported a 237 per cent growth in net profit in the June 2021 quarter.

The company has zero or almost zero debt over the past 13 years.

Debt free companies are always a good investment and with zero debt NBCC India gives more comfort to the shareholders as it also has a strong sales and profit track record.

The company’s sales grew at a CAGR of 12% between FY14 and FY20. The company’s profits have remained almost at the same level.

NBCC India has a solid track record of consistently paying dividends since 2007.

The latest developments suggest that the company will be on the initial list of firms for privatization, as the government is on the way to privatize or shut down all CPSEs in ‘non-strategic sectors’ in a phased manner.

The company’s shares have gained 103% in the past one year.

#2 GMDC

There is also another PSU in this list – GMDC.

Gujarat Mineral Development Corporation (GMDC) Limited is a mining and mineral processing company. The company is the largest merchant seller of lignite in India. It provides lignite to various industrial units including textiles, chemicals, ceramic bricks and captive power.

GMDC’s profits have declined over the years but have maintained a consistent trend. It has never reported losses for any fiscal year beginning 2001, except in the latest financial year.

Take a look at the table given below to view the financial performance of the company over the last 5 years.

Speaking of dividends, GMDC has paid huge dividends since 1997, for which the dividend yield has always been 1% or more.

The company’s shares have gained 77 per cent in the past 12 months.

The company is currently trading at an attractive price to book value of 0.6.

To know more, see GMDC’s Dividend Payment History.

#3 Indraprastha Medical

Indraprastha Medical has been in debt every year since 2002. Till this year, the company was able to bring down its debt to zero.

The company has never reported losses starting from FY 2002. However, its latest financial limit was hit hard.

Indraprastha Medical’s dividend paying history is so lucrative that the dividend yield has been above 3% since 2001.

The company has paid huge dividend till FY19. It has not paid dividend for the latest two financial years.

The company’s shares have gained 59 per cent in the past one year.

#4 NALCO

Another PSU in the list – National Aluminum Company (NALCO).

The dividend history of NALCO dates back to 1995. The state-owned company has maintained the continuity of its dividend payment by declaring dividend in all these years.

The company has almost zero debt. Its debt to equity ratio has been zero or 0.01% for the entire year.

In terms of sales and profits, take a look at the table given below to have a look at the previous years financial position of NALCO.

Last month, a military coup and political unrest in Guinea, a major supplier of bauxite, pushed the company’s shares to a 10-year high.

Political instability in the African nation has raised supply concerns for the raw material used in the production of the metal, which could lead to a rise in aluminum prices, which will benefit NALCO.

This month, the company declared the final dividend of ₹1 per share, in addition to the first and second interim dividend of ₹2.50 per share.

#5 Geojit Financial Services

Geojit Financial share price has risen significantly, with the Kochi-headquartered broking-cum-financial services company’s share price rising 107 per cent in the last 12 months.

Geojit Financial is engaged in the business of financial services activities.

from the sale of ₹389m in 2004, the company reports an average over ₹2,500 m in sales for the last eleven years.

For fiscal year 2021, it has raised . reported the sale of ₹4,250 m

Its profit record is very good. Since 2004, Geojit Financial has reported losses in only one financial year (2014). Its latest fiscal net profit was ₹1,232 m

Its dividend payment history dates back to 1998.

For the financial year 2021, the company has reported dividend ₹350%, which amount ₹3.50 per share, paying a dividend yield of 7%.

#6 Jalandhar Motor Agency

Jalandhar Motor Agency is primarily engaged in trading and distribution of automobile parts, accessories and petroleum products in India.

The company has a good sales and profit growth track record.

The company’s shares have gained 135 per cent in the past one year.

Now, there are several positive factors which have supported this stock.

The first is that the company is debt free. Jalandhar Motor Agency has maintained its ‘No Debt Company’ status over the years.

Another positive is that it has a good track record of paying dividends. At the current price, the company is offering a dividend yield of 3.3%, which is more than decent.

The third factor is that the stock is trading at 0.86 times its book value, which makes it attractive.

NS Value to Book Value Ratio Compares the market and book value of the company. The higher the book value, the more expensive the stock.

An interesting data here is that FPIs, DIIs and promoters, all of them are increasing their stake in this company.

How should one go about investing in penny stocks?

Always do your own research before investing in penny stocks as they are inherently riskier than blue-chip or mid-cap stocks.

On the bright side, they offer a huge growth potential. It’s not unusual for a good penny stock to become a multibagger in just a few months. But on the other hand, a higher risk is associated.

Not all penny stocks are outperformers. This is why penny stocks are not recommended for low-risk people.

Funds set aside for penny stocks should not exceed 5%-7% of the total funds allocated for equities.

You need a very strong framework to separate the men from the boys in the penny stock. A framework that not only enables you to zero in on the right penny stock at the right price but also helps you avoid those big losses.

Happy Penny Stock Investing!

This article is syndicated from equitymaster.com