We recently published a list of the 7 cheapest penny stocks to buy right now. In this article, we’ll take a look at how OppFi Inc. (NYSE:OPFI) stands compared to other cheapest penny stocks.
What does the employment report mean for the stock market?
The Federal Reserve’s interest rate cuts remain a hot topic for analysts, especially with the new development of the Bureau of Labor Statistics’ release of its job market report on October 4th. The weakening labor market is believed to be one of the reasons the Fed cut interest rates by 50 basis points. While the rate cuts appear to be having an effect, it also means the Fed may not have any urgency to cut rates another 50 basis points.
On October 4, Reuters reported that the job market showed significant resilience in September, with nonfarm payrolls increasing by 254,000 and the unemployment rate falling to 4.1%. U.S. employment growth increased the most in September compared to the previous six months. Additionally, nonfarm employment increased more than expected last month, and wages also rose at a solid pace.
Fed Chairman Jerome Powell has already indicated that the urgency to cut interest rates is not what the market is looking for at this point. He said the committee did not feel in a hurry to cut rates quickly.
These recent developments pave the way for a smooth 25 basis point rate cut and brighten the path to a soft landing scenario. In one of our recent articles on 8 stocks under $20 to invest in right now, we detailed the soft landing scenario and what it means for the stock market. Here is an excerpt from the article:
Larry Adam, chief investment officer at Raymond James, said the current market is in a soft landing situation. Adam recently appeared in an interview on CNBC and talked about how lower interest rates could benefit small-cap stocks, especially the Russell 2000. He believes the bull market will continue while the economy gradually moves towards a soft landing.
For small-cap stocks, about 56% of funding comes from the short end of the curve. The short end of the curve refers to short-term interest rates on the yield curve, typically representing yields on bonds with shorter maturities, such as two-year or five-year U.S. Treasuries. Larger companies, on the other hand, receive only 26% of funding from these ends of the curve. Therefore, Adam believes that the Fed will continue to lower interest rates, which will help small-cap stocks meet their funding needs.
He also noted that the Fed is expected to cut rates twice this year and four more next year. Another reason he likes small-cap stocks is because the economy is headed for a soft landing. Adam emphasized that we have already seen that small-cap stocks outperformed large-cap stocks as a result of rate cuts. Historically, when the economy takes a soft landing, small-cap stocks usually fare better than the rest of the market. ”
Wharton School finance professor Jeremy Siegel joins CNBC to talk about what will happen to the market after this report. He pointed out an interesting fact from employment statistics. Mr. Siegel said that although 550,000 new jobs were added in the third quarter, hours worked were about the same.
Mr. Siegel expects GDP growth in the third quarter to be around 2.5% to 3%. Additionally, the good news for stocks is that current job market numbers do not suggest inflation, but rather productivity. Professor Siegel stressed that he did not expect the second rate cut to be 50 basis points, and assured that quarterly rate cuts would continue by 25 basis points. These all indicate that a soft landing scenario is becoming more likely.
Is there room for upside for small-cap stocks?
Now that we know the economy is headed for a soft landing rather than a recession, let’s take a look at how small-cap stocks are expected to perform in the current climate. Nancy Prial, co-chief executive officer and senior portfolio manager at Essex Investment Management, recently spoke to CNBC to discuss the expected performance of small-cap stocks amid a slowing economy. Prial believes this is the start of a multi-year bull cycle for small-cap stocks. There are few underlying fundamentals behind this claim, including a significant lack of ownership in small-cap stocks, which are in fact at record low levels as a percentage of the overall stock market. Additionally, small-cap stocks have incredibly attractive valuations, much lower than the S&P 500’s large-cap stocks.
Prial believes that what was really needed to turn things around was a Fed rate cut and confidence that the economy was headed for a soft landing. Another important factor needed was relative earnings growth for small-cap stocks. Prial said earnings growth for these stocks is expanding and he expects small-cap stocks to grow faster than large-cap stocks by the end of the year.
Looking at the S&P 500’s EPS growth forecast, the market is expected to grow more than 13% year-over-year in the fourth quarter and more than 15% next year. Nancy Prial further clarified that the overall index may not perform more than 15%, saying that small-cap stocks are expected to outperform large-cap stocks. But she believes there are many small-cap stocks that will grow 15% to 20% or more next year, so investors need to be smart stock picks to take advantage of earnings growth trends. Within the small-cap category, Prial likes the energy sector, which he believes will be a major player in the data center and AI industries for years to come.
our methodology
We used the Finviz stock screener to create a list of the 7 cheapest penny stocks to buy right now. The screener yielded a consolidated list of stocks that trade below $5, have a forward price-to-earnings ratio (market P/E ratio according to the Wall Street Journal) of less than 24.35, and are expected to grow earnings this year. Once we had an aggregate list of stocks that met our criteria, we ranked them based on the number of hedge fund holders in Q2 2024 from Insider Monkey’s database. The list is ranked by number of hedge funds. Please note that the stock prices in the article were recorded on October 7, 2024.
Why do we care what hedge funds do? The reason is simple. Our research shows that by mimicking the top stock picks of the best hedge funds, you can outperform the market. Our quarterly newsletter strategy selects 14 small- and large-cap stocks each quarter and has returned 275% since May 2014, outperforming the benchmark by 150 percentage points (Learn more ).
OppFi Inc. (OPFI): Expanding financial access for millions of Americans
A high-rise office building used by a financial technology platform in Chicago.
OppFi Inc. (NYSE:OPFI)
Stock price: $4.47
Expected PER: 6.01
This year’s profit growth rate: 45.10%
Number of hedge fund holders: 15 people
OppFi Inc. (NYSE:OPFI) is a financial technology company that helps Americans access credit from commercial banks. This allows people who would not qualify for traditional loans to access loans and credit products through its platform. The company offers OppLoans, which allows eligible applicants to apply for loans online through a mobile-enabled platform, the TurnUp program, which helps users compare different credit products on the market, and finally, which allows borrowers to make repayments directly from their paychecks. We offer three main programs including SalaryTrap. .
Two things stand out when it comes to the OppFi Inc. (NYSE:OPFI) investment case. First is the history of profitability. The company has generated positive net income for the past nine years. Second, and attractively, it is an accessible market, representing more than 60 million Americans who are unbanked and lack access to traditional banking services.
Speaking of profitability, OppFi Inc. (NYSE:OPFI) posted record revenue in the second quarter of this fiscal year. Net income reached $27.7 million, an increase of 53.1% year-over-year, marking the highest second-quarter profit ever generated by the company. Adjusted earnings per share also increased by 53.3% over the same period. Both net income and EPS exceeded management’s expectations, leading to a more than 20% increase in full-year guidance.
OppFi Inc. (NYSE:OPFI) is trading at a discount. Trading at just 6 times expected earnings, with analysts expecting annual earnings to grow 45%, OPFI is one of the cheapest penny stocks you can buy right now.
Overall, OPFI ranks #6 on our list of cheapest penny stocks to buy right now. While we acknowledge that OPFI has the potential for growth, we believe AI stocks are more likely to deliver higher returns and do so in a shorter period of time. If you’re looking for promising AI stocks trading at less than 5x earnings, check out our report on the cheapest AI stocks.
Read next: $30 trillion opportunity: 15 humanoid robot stocks to buy, according to Morgan Stanley and Jim Cramer, says NVIDIA has ‘become a wasteland.’ Disclosure: None. This article was originally published on Insider Monkey.
