LUGDF - 3 Undiscovered OTC Stocks to Buy for Multibagger Returns

2024-05-17 06:21:00 ET

InvestorPlace - Stock Market News, Stock Advice & Trading Tips

The OTC exchange does not get the attention it deserves. Without a doubt, many purely speculative stocks are listed on the exchange. However, some quality ideas are traded and have remained undiscovered. Therefore, this column focuses on OTC stocks to buy that can deliver 5x or 10x returns in the next five years.

The good thing about undiscovered stocks is that they are generally undervalued. The news is baked into the price when a stock is in the limelight. However, there can be a significant valuation gap in under-the-radar ideas.

These OTC stocks represent companies positioned to grow at a healthy pace in the next five years. This growth is likely associated with a significant upside in cash flows. Let’s discuss the reasons for being bullish on these OTC stocks to buy.

BW Energy (BWEFF)

BW Energy (OTCMKTS: BWEFF ) is among the most undervalued OTC stocks to buy. The oil and gas exploration company has garnered little or no attention but has the potential to be a 10-bagger by 2028. Considering the growth potential, the current market valuation of $700 million seems minuscule.

As an overview, BW Energy has oil and gas exploration assets in Brazil and Gabon. As of 2023, the company reported 2P (proved) and 2C (contingent resources) of 580mmboe. A strong reverse base provides production growth visibility through 2028. While production growth will be relatively subdued in 2024 to 2026, ac v big bump-up is expected in 2027 and 28.

It’s worth noting that the company’s assets have an attractive break-even. For 2023, BW Energy reported revenue and EBITDA of $500.3 million and $241 million, respectively. Further, the balance sheet is strong, with an equity ratio of 40% and a cash buffer of $194 million. With high financial flexibility, BW Energy will likely continue investing aggressively in its asset base. Overall, a company’s stock trading at 1.4x 2023 sales is a steal.

Lundin Gold (LUGDF)

As gold trades near $2,400 an ounce, it’s a good time to remain invested in gold mining stocks. With the likelihood of rate cuts in the year’s second half, I expect gold to trade above $2,500 an ounce.

Lundin Gold (OTCMKTS: LUGDF ) is an attractive name among gold mining stocks that’s under the radar. In the last 12 months, LUGDF stock has trended marginally higher by 7.5%. A forward P/E 20.9 indicates undervaluation for this 2.74% dividend yield stock.

Recently, Lundin reported Q1 2024 results and gold production for the quarter was 111,572 ounces. Further, the company has guided for 2024 gold production of 450,000 to 500,000 ounces. The most important point to note in the results is an all-in-sustaining cost of $868 per ounce . With gold trading at $2,400 an ounce, there is visibility for robust EBITDA margin and free cash flow upside.

It’s also worth noting that Lundin is debt free as of Q1 2024. With the prospects of robust cash flows, the company has high financial flexibility for organic and potential acquisition driven growth. I also expect a healthy upside in dividends.

Curaleaf Holdings (CURLF)

Curaleaf Holdings (OTCMKTS: CURLF ) stock has surged by 119% in the last 12 months. The rally has, however, been from deeply oversold levels, and CURLF stock remains attractive for fresh exposure.

Recently, cannabis was legalized in Germany for recreational use. Further, with calls for the reclassification of cannabis as a Schedule III drug in the United States, the regulatory headwinds are gradually waning. I, therefore, expect growth for the cannabis sector to accelerate.

For Q1 2024, Curaleaf reported subdued revenue growth of 2% on a year-on-year basis to $339 million. For the same period, the adjusted EBITDA margin was 23%, and Curaleaf reported an operating cash flow of $46 million.

In my view, revenue growth is likely to accelerate in the coming quarters. My point is underscored by the fact that Curaleaf has pursued aggressive expansion in Europe. Recently, the company also acquired Northern Green Canada , supporting expansion in European and emerging markets. I must add that Curaleaf has a strong presence in the U.S., with operations in 17 states.

On the date of publication, Faisal Humayun 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 .

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