6 Debt Free Penny Stocks with Solid Growth

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6 Debt Free Penny Stocks with Solid Growth

Oct 2, 2021

6 Penny Stocks with Solid Growth and Zero Debt

Bull market or bear market, regardless of what cycle we're in, people are always on the lookout for 'cheap' penny stocks to buy.

After all, who doesn't love to buy a stock as cheap as under Rs 50 and sell when it doubles or triples wealth.

Penny stocks which have a decent balance sheet, low or zero debt and a track record for paying dividend can fare much better against their peers.

Such companies deserve to be a part of your watchlist.

Let's take a look at the top six penny stocks which fulfill all the criteria mentioned above.

#1 NBCC (India) Ltd.

NBCC (India) operates into three major segments - project management consultancy, real estate, and engineering procurement & construction.

It's a PSU with government of India holding 61.75% stake as of June 2021.

NBCC, which has a wide footprint in civil construction, residential & commercial projects including redevelopment of government colonies, had reported a 237% YoY increase in net profit in the June 2021 quarter.

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

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

The company's sales grew at a CAGR of 12% between fiscal 2014 and fiscal 2020. The company's profits have stayed at almost the same level.

(Rs m) Net Sales Net Profit
FY14 40,701.01 2,574.53
FY15 43,998.49 2,782.77
FY16 58,263.77 2,892.98
FY17 74,246.56 3,547.16
FY18 84,470.87 3,782.91
FY19 99,429.74 3,751.60
FY20 80,870.74 782.34
FY21 68,320.65 2,218.00
Data Source: Ace Equity

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

Latest developments suggest that the company will likely feature on the initial list of firms for privatisation, as the government embarks on the path of privatising or closing down all CPSEs in the 'non-strategic sectors' in a phased manner.

Over the past one year, shares of the company have gained 103%.

To know more, check out the NBCC company fact sheet and quarterly results.

#2 GMDC

Another on this list is also a PSU - GMDC.

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

GMDC's profits have declined over the years but it has maintained consistency. It has never reported losses for any financial year starting back from 2001, barring the latest fiscal.

Have a look at the table below to see the company's financial performance for the past 5 years.

(Rs m) FY17 FY18 FY19 FY20 FY21
Net sales 15,367 20,509 18,797 15,209 13,392
Sales growth (%) 30.4% 33.5% -8.3% -19.1% -11.9%
Operating profit 5,999 6,706 7,006 3,539 1,432
Operating profit margin (%) 39.0% 32.7% 37.3% 23.3% 10.7%
Net profit 3,255 4,276 2,197 2,021 -393
Net profit margin (%) 21.2% 20.8% 11.7% 13.3% -2.9%
Data Source: Ace Equity, Equitymaster

Coming to dividends, GMDC has paid hefty dividends since 1997, dividend yield for which has always stayed at or above 1%.

Over the past 12 months, shares of the company have gained 77%.

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

To know more, check out GMDC's dividend payout history.

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#3 Indraprastha Medical

Indraprastha Medical has had debt for every year since 2002. It was until this year that the company was able to bring down its debt to zero.

The company has never reported a loss starting fiscal 2002. Although its latest fiscal bottomline was drastically affected.

Indraprastha Medical's dividend payout history is so attractive that the dividend yield has stayed above 3% since 2001.

The company has paid out hefty dividends till fiscal 2019. It has not paid out dividend for the latest two fiscals.

Year Dividend per Share(Rs) Dividend Yield %
31-Mar-19 1.6 4.17
31-Mar-18 1.5 3.11
31-Mar-17 1.8 3.39
31-Mar-16 1.8 3.46
31-Mar-15 1.8 3.24
31-Mar-14 1.8 4.63
31-Mar-13 1.6 4.89
31-Mar-12 1.6 4.53
31-Mar-11 1.6 4.71
31-Mar-10 1.6 3.53
31-Mar-09 1.5 5.37
Data Source: Ace Equity

Over the past one year, shares of the company have gained 59%.

To know more, check out Indraprastha Medical company fact sheet and quarterly results.

#4 NALCO

Another PSU on the list - National Aluminum Company (NALCO).

Nalco's dividend history goes back to 1995. The government owned company has maintained its dividend payout consistency by declaring dividends throughout all these years.

The company has almost nil debt. Its debt to equity ratios has stayed nil or 0.01% throughout the years.

Coming to sales and profits, have a look at the table below to see Nalco's financials over the years.

(Rs m) FY15 FY16 FY17 FY18 FY19 FY20 FY21
Net sales 73,828 68,170 75,430 95,095 114,993 84,718 89,558
Sales growth (%) 8.9% -7.7% 10.7% 26.1% 20.9% -26.3% 5.7%
Operating profit 25,455 15,646 14,879 16,971 32,184 7,618 19,294
Operating profit margin (%) 34.5% 23.0% 19.7% 17.8% 28.0% 9.0% 21.5%
Net profit 13,219 7,872 6,677 13,422 17,337 1,362 12,994
Net profit margin (%) 17.9% 11.5% 8.9% 14.1% 15.1% 1.6% 14.5%
Data Source: Ace Equity

Last month, shares of the company surged to 10-year highs due to a military coup and political unrest in Guinea, a major supplier of bauxite.

The political instability in the African nation has fueled supply concerns for the raw material used in production of the metal, which could hike aluminium prices, which will in turn benefit NALCO.

nalco

This month, the company announced a final dividend of Rs 1 per share, in addition to the 1st and 2nd interim dividend of Rs 2.50 per share.

To know more, check out NALCO dividend payout history.

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#5 Geojit Financial Services

Geojit Financial share price has had a great run with the stock price of Kochi-headquartered broking-cum-financial services company increasing 107% in the last 12 months.

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

From sales of Rs 389 m back in 2004, the company reports on an average over Rs 2,500 m in sales for the past eleven years.

For fiscal 2021, it reported sales of Rs 4,250 m.

Its profit record is much better. Since 2004, Geojit Financial has only reported loss in one fiscal (2014). Its latest fiscal net profit stood at Rs 1,232 m.

Its dividend payout history goes back to 1998.

For fiscal 2021, the company has reported a dividend of Rs 350%, which amount to Rs 3.50 per share, giving a dividend yield of 7%.

To know more, check out Geojit Financial company fact sheet and quarterly results.

#6 Jullundur Motor Agency

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

The company has decent sales and profit growth track record.

(Rs m) Net Sales Net Profit
FY15 4,094.21 154.5
FY16 4,151.20 133.71
FY17 3,874.19 136.89
FY18 3,271.68 127.64
FY19 3,557.64 159.57
FY20 3,619.29 140.14
FY21 3,870.00 230.1
Data Source: Ace Equity

Over the past one year, shares of the company have rallied 135%.

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

First one being that the company is debt free. Jullundur Motor Agency has maintained its 'no debt company' status over the years.

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

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

The price to book value ratio compares the market and book value of the company. The higher the price to book value, the more expensive the stock.

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

How should one go about investing in penny stocks?

One should always do their own research before investing in penny stocks as they are inherently riskier than blue-chip or mid cap stocks.

On the brighter side, they present a huge growth potential. It's not unusual for a good penny stock to turn a multibagger in a matter of months. But on the flipside, there is a high risk attached.

Not all penny stocks tend to be outperformers. That is the reason penny stocks are not recommended to those having a low risk profile.

The corpus that one sets aside for penny stocks should not be more than 5%-7% of the total money allocated towards equities.

You need a very strong framework to separate men from the boys in penny stocks. 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 losers.

Back in July 2020, Co-head of Research at Equitymaster, Rahul Shah shared a very effective technique that zeroes in on the right penny stocks.

Since you are interested in penny stocks, check out our ultimate guide to penny stock investing.

Happy Penny Stock Investing!

Here are Links to Some Very Insightful Equitymaster Articles and Videos on Penny Stocks:

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Equitymaster requests your view! Post a comment on "6 Debt Free Penny Stocks with Solid Growth". Click here!

1 Responses to "6 Debt Free Penny Stocks with Solid Growth"

Akhilesh kumar

Oct 3, 2021

Excepting good infuture.

Like (1)
  
Equitymaster requests your view! Post a comment on "6 Debt Free Penny Stocks with Solid Growth". Click here!

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