United States productivity increased by a 3.7% annualized rate in Q2 2023. Michael Feroli, Chief U.S. economist at JPMorgan (NYSE:JPM), wrote that expectations for a strong boost in the three-month period “offer glimmers of hope that trend productivity is picking up,” as rising investment in software and information processing will boost growth for the economy. More notably, growth has exceeded 1.8% in 21 out of the 28 quarters over the past three years. This includes a period of 2.5% annual growth between the 2016 Fed meeting and the onset of the coronavirus pandemic. Under President Joe Biden, the growth has been around 3% on average.
With innovation-driven productivity gains and an optimal environment for investment, the U.S. is poised for continued economic growth, translating into favorable conditions for stock market growth. Undervalued stocks in particular have the most room and growth potential long term.
Here are three top penny stocks that you would not want to miss out on.
Ardelyx Incorporated (ARDX)
Ardelyx Incorporated (NASDAQ:ARDX) is a biopharmaceutical company that develops drugs aimed at the gastrointestinal tract, cardiorenal syndrome, and metabolic diseases. Hovering at just the $3 range, ARDX stock is up 33.58% year-to-date. Yahoo! Finance reports 7 analysts having a mean one-year target price of $8.65, with the range spanning from $5.00 to $15.00. 5 of 7 analysts also labeled ARDX stock as a “strong buy.”
Amid such high confidence levels from analysts and brokerages, Ardelyx has strong financial performances. For Q2 2023, it announced revenue of $22.33 million, which increased 784% YoY and outperformed expectations by $7.05 million. Diluted EPS of -$0.08 grew 57.9% YoY and beat projections by $0.03. Though negative, net income of -$17 million grew 37% from last year’s result of -$27 million, showing that income metrics are rapidly growing to profitability in the near years.
Ardelyx has recently announced that Tenapanor, an oral pill designed to treat IBS, has been accepted for review by China’s Center for Drug Evaluation of the National Medical Products Administration (NMPA). Not only does this acceptance prompt a $2 million payment to Ardelyx, but it also creates a potential for the company to expand its product’s market and audience. Tenapanor had previously been FDA-approved for Americans, and Ardelyx saw consistent “month-over-month growth trends in both new and refill prescriptions” as a result. Thus, it is likely a Chinese approval would yield the same growth-inducing catalyst effects.
This approval expected by 2024 expands on the growth potentials of ARDX stock. The incredibly low price makes it a great pick that will prove lucrative in the foreseeable future.
Rocket Lab (RKLB)
Rocket Lab USA (NASDAQ:RKLB) is an end-to-end space company that is a publicly traded aerospace manufacturer and launch service provider. Through the manufacture of Electron, which is the industry-defining launch vehicle, its brand recognition got better, allowing RKLB to collaborate with other space companies.
At $5.83, RKLB stock is up 50.65% YTD. The global rocket propulsion market is expected to grow at an 8.7% CAGR from $5.79 billion in 2022 to $ 9.57 million in 2028. This strong growth will ultimately benefit RKLB stock.
RKLB made solid progress in growing its financials over the years. Revenue of $62.04 million grew 11.85% YoY which beat analyst expectations by 0.42%, and its net change in cash of -10.95 million grew 82.1% YoY.
Rocket Lab’s contract with NASA is the most significant catalyst for future growth in financials. Recently, Rocket Lab has signed a double-launch deal with NASA which is part of a deal executed under NASA’s $300 million Venture-class Acquisition of Dedicated and Rideshare contract vehicle. Rocket Lab’s duty is to support the deployment of two six-unit CubeSats into space using the company’s Electron rocket. The data from PREFIRE satellites will be used by researchers to improve the accuracy of climate models for predicting storm severity and frequency and coastal erosion and flooding. Furthermore, these PREFIRE launch efforts mark the seventh and eighth partnership between Rocket Lab and the space agency, demonstrating how Rocket Lab is continually seeking out growth and improvements for its consumers.
Yahoo! Finance reports 4 analysts having a mean 12-month price target of RKLB stock to reach $9.83, with the range spanning from as low as $5.83 to as high as $14.00. Rocket Lab’s partnership with NASA will be a major growth catalyst in the foreseeable future, and its recovering financials add to reasons to buy RKLB stock long term.
SoundHound AI Incorporated (SOUN)
SoundHound AI Incorporated (NASDAQ:SOUN) is an audio and speech recognition company, with services including natural language understanding, speech recognition, and search technologies.
Soundhound has healthy financials, as seen through its Q3 revenue of$8.7 million beating analyst estimates by $690.7 thousand and growing at an 84.2% 1-year CAGR. Management is also successfully investing in value-generating assets, with a working capital of $24.4 million growing at a 1-year 223.6% CAGR and a 74.7% gross profit margin well above the sector median of 48.6%.
SoundHound has established long-term partnerships for growth. The company has secured a contract with fast food franchise White Castle, where it will implement its AI and speech recognition systems into drive-thru lanes for voice-AI-enabled drive-thru experience to 100+ White Castle locations by the end of 2024. SoundHound also has a partnership with Block Incorporated, integrating its conversational AI with Block’s Point-of-Sale (POS) system. The integrated POS system completely automates the restaurant ordering process while being capable of handling complex tasks such as taking modifications to an order. The services in these partnerships are extremely convenient to the fast-food and restaurant industries, increasing the company’s value along the way.
Additionally, SoundHound released its Smart Answering service, allowing businesses to harness Generative AI to effectively handle customer queries simultaneously. SoundHound has also developed a car-specific service, Chat AI Automotive. With Chat AI Automotive, Soundhound reduces misleading responses (hallucinations) and delivers the best possible automotive assistant experience to customers.
Yahoo! Finance reports 3 analysts predicting a 1-year price range for SOUN stock to be between $4.20 and $7.00, with an average of $5.23. The company’s automation of the entire customer service process allows businesses to optimize capital expenditures. With SOUN trading at only $2.16, SOUN is a must-buy penny stock for the reasons covered above.
On the date of publication, Michael Que did not have (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.
The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.