5 Penny Stocks With Plenty of Reward

NEW YORK ( TheStreet) - The S&P Small Cap 600 Index registered gains of 9.8% in the past three months as compared to a 6.4% gain recorded by the S&P Index. The current market volatility has thrown up an abundance of penny stocks to suit speculative investors, with many priced below $5. Although investors prefer safe and stable stocks when markets gyrate, they also can consider these penny stocks for potential reward.

Based on average estimates of analysts polled by Bloomberg, these five stocks have potential upsides ranging from 29% to 205%, with an average of 61% of analysts issuing buy ratings.

The stocks are listed in ascending order of upside potential.

5. SiriusXM Radio ( SIRI) is a satellite radio company. It broadcasts more than 135 satellite radio channels of commercial-free music and other services to over 21 million subscribers in the U.S. The company syndicates content from some of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and providers of national news and talk shows.

Of the 12 analysts covering the stock, 75% recommend a buy and 16.7% suggest a hold. Analysts' average 12-month price target for the stock is $2.28, about 28.9% higher than the current price, according to Bloomberg.

For the third quarter of fiscal 2011, SIRI reported total revenue of $763 million, up 6% from the same quarter last year. Adjusted EBITDA rose 16% to $197 million. Net income was up 54% at $104 million, while free cash flow increased 22%.

The company's subscriber base grew 7% year-over-year to 21.3 million. Net additions for the quarter were 364,004, up 41% from the third quarter of 2010. The self-pay subscriber base reached an all-time high of 17.5 million, growing 7% year-over-year. In October, SIRI launched an expanded channel lineup, such as new music, comedy, sports as well as Sirius XM Latino, a suite of Latin channels.

For fiscal 2012, SIRI anticipates revenue growth of 10% to over $3.3 billion and adjusted EBITDA of 20% to $860 million.

In December, the company announced that it will launch Tiesto's Club Life Radio, the 24/7 commercial-free music channel featuring music by superstar DJ Tiesto.

4. Radisys ( RSYS) is a provider of embedded wireless infrastructure solutions deployed in telecom, aerospace, defense and public safety applications. Its solutions are used in a broad range of 3G and 4G network applications that support the aerospace, defense and public safety sectors.

All the six analysts covering the stock rate it a buy. The stock' average 12-month price target is $9.70, about 97.3% higher than the current price, a Bloomberg consensus shows.

For 2011 third quarter, the company reported revenue of $97.9 million, up 30.2% in the same period fiscal 2010. The company's Next-Generation Communications Networks product revenue stood at $53.6 million, up 74% from the same quarter last year.

In December, the company announced performance enhancements to its Trillium Femtotality solution. Also, three company directors purchased 59,772 shares during the month in the price range of $4.21 to $4.35.

For fiscal 2011, the company's total non-GAAP revenue guidance is $329 million to $335 million, up 16% to 18% over 2010. Meanwhile, Next Generation Communication Networks non-GAAP revenue is expected to grow by 20%.

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3. Capstone Turbine ( CPST) is a leading producer of low-emission micro-turbine systems. It pioneered the marketing of commercially viable micro-turbine energy products, with shipments of approximately 6,000 Capstone MicroTurbine systems worldwide.

Of the six analysts covering the stock, five recommend a buy. The stock's average 12-month price target is $2.30, about 121.2% higher than the current price, according to a Bloomberg consensus.

For 2012 second quarter, the company reported revenue of $27.5 million, up 46% from the same period in fiscal 2011. The company shipped 172 units, or 23.6 megawatts during the quarter compared to 174 units, or 15.8 megawatts, in the same period last year. Average revenue per unit increased to $130,000 from $90,000 in the same quarter of fiscal 2011.

Backlog for the quarter stood at $113.7 million, vs. the prior quarter, and up 36% from the same period last year.

The company has entered into warrant exercise agreements with various holders to bolster its balance sheet and simplify the capital structure.

Capstone received the 2011 NOVA award from the Construction Innovation Forum for its micro-turbine technology at Syracuse University's data center.

2. FuelCell Energy ( FCEL) manufactures ultra-clean stationary fuel cell power plants that generate electricity at nearly double the efficiency of conventional fuel plants. Its power plants have generated over 900 million kilowatts of power using fuels such as renewable biogas from wastewater treatment and food processing, as well as clean natural gas.

Of the seven analysts covering the stock, five recommend a buy and one rates a hold. The stock's average 12-month price target is $3.00, or 175.2% above the current price, according to a Bloomberg survey.

Total revenue for the fourth quarter of fiscal year 2011 was $34.7 million, up 76% from the same period last year. Product sales and revenue for the quarter increased 94% to $33.3 million. The backlog for product sales and service amounted to $209.9 million, as of October, compared to $154.3 million in the prior-year period. The backlog for service agreement was $78.1 million, up 16.4% in the same period last year.

The company anticipates a current annual production run-rate of 56 megawatts in the first quarter of fiscal year 2012. At this run-rate, product sales and revenue are expected to be in the range of $31 million to $34 million per quarter. Planned production in fiscal 2012 includes 33.6 megawatts of fuel cell kits, 10 megawatts for other backlog and scheduled re-stacks under long-term service agreements, and the balance reserved for projected new orders requiring delivery in 2012.

Earlier this month, the company signed an agreement with Abengoa S.A. to develop localized stationary fuel cell power plants for markets in Europe and Latin America. Abengoa will develop, manufacture and market stationary fuel cell power plants using FuelCell's modules.

1. Active Power ( ACPW) is a provider of critical power solutions that ensure business continuity in the event of power disturbances. The company operates in more than 40 countries with premier flywheel-based uninterrupted power supply systems and turnkey power solutions. It has shipped over 3,200 flywheels via system installations, delivering more than 800 megawatts of critical power to customers in 42 countries.

Of the eight analysts covering the stock, 75% recommend a buy and 12.5% suggest a hold. The stock's average 12-month price target is $2.06, or 205% above the current price, according a Bloomberg consensus.

For 2011 third quarter, the company recorded revenue of $20.6 million, an increase of 12% over the same quarter preceding year. Revenue for the nine months ended Sept. 30 grew 25% to $57.2 million, compared to the same period in 2010. The information technology channel saw revenue growth of 44%.

The company expects fourth quarter 2011 revenue between $18 million to $21 million and full year 2011 revenue in the $75 million to $78 million range. EPS is expected of up to 3 cents.

>>To see these stocks in action, visit the 5 Penny Stocks With Plenty of Reward portfolio on Stockpickr.

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