Many investors are skeptical about over-the-counter (OTC) stocks due to their easy financial-disclosure requirements, which often don’t allow investors to know the investment risks. However, there are several financially-sound OTC stocks that are often overlooked by investors.
Many companies that are based outside the United States list their shares on the OTC market to avoid the high cost of listing on NYSE or Nasdaq. So, not necessarily all OTC stocks are bad investment propositions. With retail investors increasingly playing an important role in the market, several quality OTC stocks might witness a solid upside in the near term.
Keeping these factors in mind, it could be wise to bet on the following OTC stocks that hold immense upside potential based on their fundamental strength — Tencent Holdings Limited (TCEHY), Volkswagen AG (VWAGY), Daimler AG (DDAIF), Bayer Aktiengesellschaft (BAYRY), and Ubisoft Entertainment SA (UBSFY).
Tencent Holdings Limited (TCEHY)
Based in China, TCEHY is an investment holding company that provides value-added services (VAS) and online advertising services internationally. The company operates through VAS, Online Advertising, FinTech and Business Services segments. It offers online games and social network services, FinTech and cloud services, and online advertising services.
TCHEY announced the launch of four new internet data centers (IDC) in Bangkok, Frankfurt, Hong Kong and Tokyo on June 3, 2021. This marks an important step in the company’s strategy of rapidly and efficiently expanding its international portfolio.
TCEHY’s non-IFRS revenue increased 25% year-over-year to $20.60 billion for the fiscal first quarter that ended March 31, 2021. Its non-IFRS operating profit grew 20% year-over-year to $6.50 billion, while its non-IFRS profit for the period increased 23% year-over-year to $5.30 billion. The company’s IFRS EPS increased 63.9% year-over-year to CNY 4.91 ($0.76).
Analysts expect TCEHY’s EPS and revenue to increase 19.2% and 19.7% year-over-year to $2.36 and $89.88 billion, respectively in fiscal 2021. It surpassed street EPS estimates in each of the trailing four quarters. The stock has gained 31.8% over the past year to close yesterday’s trading session at $78.30.
TCEHY’s POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Stability. Within the China industry, TCEHY is ranked #29 out of 74 stocks.
To see additional POWR Ratings for TCEHY (Growth, Value, Momentum, Sentiment and Quality), click here.
Volkswagen AG (VWAGY)
VWAGY is a subsidiary of Porsche Automobil Holding SE which manufactures and sells automobiles. The Germany-based company operates in four segments: Passenger Cars and Light Commercial Vehicles, Commercial Vehicles, Power Engineering, and Financial Services. It also offers motorcycles and provides its products under several brands such as Audi, Porsche, Lamborghini, and Bugatti.
The company announced on April 27, 2021, that Volkswagen Group China has begun construction of an all-new MEB plant at Volkswagen Anhui recently, the group’s third pure-electric vehicle manufacturing facility in China. This is expected to help VWAGY deliver more EVs.
VWAGY’s sales increased 13.3% year-over-year to €62.38 billion ($74.51 billion) for the fiscal first quarter that ended March 31, 2021. Its operating profit grew 432.3% year-over-year to €4.81 billion ($5.75 billion), while its earnings before tax increased 554.4% year-over-year to €4.46 billion ($5.33 billion). The company’s earnings after tax increased 560.3% year-over-year to €3.41 billion ($4.08 billion).
In fiscal 2021, analysts expect VWAGY’s EPS to come in at $6.28, which represents a 212.8% year-over-year increase. The company’s revenue is expected to increase 52.2% year-over-year to $74.02 billion for the current quarter ending June 30, 2021. The stock has gained 111.3% over the past year to close yesterday’s trading session at $34.85.
VWAGY’s strong fundamentals are reflected in its POWR Ratings. The company has an overall grade of A, which translates into a Strong Buy rating in our proprietary ratings system. The stock has a B grade for Momentum, Growth, Value and Stability. In the 57-stock Auto & Vehicle Manufacturers industry, it is ranked #9.
In addition to the POWR Ratings grades I've just highlighted, we’ve also provided grades for Quality and Sentiment. Get all VWAGY’s ratings here.
Click here to check out our Electric Vehicle Industry Report for 2021
Daimler AG (DDAIF)
DDAIF is another Germany-based company engaged in the development and manufacture of passenger cars, trucks, vans, and buses internationally. It operates through several segments including Mercedes-Benz Cars & Vans, Daimler Trucks and Buses, and Daimler Mobility segments. The company also sells vehicle-related spare parts and accessories.
On February 3, 2021, DDAIF announced its plans to evaluate a spin-off of its Truck and Bus business and begin preparations for a separate listing of Daimler Truck. This is expected to help it focus more on its core group such as Mercedes-Benz Cars segment and make necessary advancements in relevant technologies to accelerate its growth.
DDAIF’s revenue surged 10.2% year-over-year to €41.02 billion ($49.60 billion) in the first quarter that ended March 31, 2021. Its EBIT grew 831.6% year-over-year to €5.75 billion ($6.95 billion). Its net profit came in at €4.37 billion ($5.29 billion), which represents a 2,503% year-over-year increase. The company’s EPS came in at €4.01 ($4.85), up 4,355.5% year-over-year.
Analysts expect DDAIF’s EPS and revenue to increase 274.7% and 56.4% year-over-year to $3.86 and $51.95 billion, respectively, for the current quarter ending June 30, 2021. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 128.3% over the past year to close yesterday’s trading session at $94.74.
It’s no surprise that DDAIF has an overall grade of A, which equates to a Strong Buy rating in our POWR Ratings system. The stock has an A grade for Growth, and a B grade for Value, Sentiment, Stability and Momentum. Click here to see DDAIF’s grades for Quality. DDAIF is ranked #1 in the Auto & Vehicle Manufacturers industry.
Click here to check out our Automotive Industry Report for 2021
Bayer Aktiengesellschaft (BAYRY)
BAYRY operates as a life science company worldwide. It operates through Pharmaceuticals, Consumer Health, and Crop Science segments. The company has a collaboration agreement with MD Anderson Cancer Center to develop oncology drugs and a strategic research partnership with University of Oxford to develop novel gynecological therapies.
BAYRY announced on June 3, 2021 that it has entered into an agreement to acquire Noria Therapeutics Inc. and PSMA Therapeutics Inc. The acquisition should broaden the company’s existing oncology portfolio of targeted alpha therapies (TAT), and solutions for prostate cancer treatment.
The company’s EBIT increased 23.4% year-over-year to €3.08 billion ($3.68 billion) for the fiscal first quarter that ended March 31, 2021. Its net income grew 40.3% year-over-year to €2.09 billion ($2.49 billion). The company’s EPS increased 40.1% year-over-year to €2.13 ($2.54).
For the quarter ending June 30, 2021, analysts expect BAYRY’s EPS and revenue to come in at $0.47 and $12.67 billion, which represents a 6.8% and 14.5% year-over-year increase respectively. The stock has gained 8.2% year-to-date to close yesterday’s trading session at $15.97.
BAYRY’s POWR Ratings reflect solid prospects. The company has an overall grade of B, which translates into a Buy rating in our proprietary ratings system. It has a B grade for Value, Stability, and Growth.
To see additional grades for BAYRY (Momentum, Sentiment and Quality), click here.
BAYRY is ranked #21 of 228 stocks in the Medical – Pharmaceuticals industry.
Click here to checkout our Healthcare Sector Report for 2021
Ubisoft Entertainment SA (UBSFY)
Headquartered in Montreuil, France, UBSFY produces, publishes, and distributes video games for PC, consoles, smartphones, and tablets in both physical and digital formats worldwide. The company designs and develops software, design tools and game engines, and is also involved in the area of online mobile gaming and film business.
On May 6, 2021, UBSFY announced the expansion of the Tom Clancy’s The Division universe by unveiling Tom Clancy’s The Division Heartland, which is a brand new free-to-play game. This could lead to increasing sales for the company due to the popularity of the franchise.
UBSFY’s sales increased 39.5% year-over-year to €2.22 billion ($2.71 billion) for the fiscal fourth quarter that ended March 31, 2021. Its operating income came in at €289.4 million ($352.81 million) compared to an operating loss of €59.5 million ($72.54 million) in the prior-year period. The company’s net income came in at €105.2 million ($128.25 million) compared to a net loss of €124.2 million ($151.41 million) in the prior-year quarter. The company’s EPS came in at €0.85 ($1.01) compared to a loss per share of €1.12 ($1.34) in the year-ago period.
The company’s revenue is expected to increase 82.2% year-over-year to $733.42 million for the quarter ending September 30, 2021. The stock has surged 7.8% over the past month to close yesterday’s trading session at $14.04.
UBSFY has an overall grade of B, which equates to a Buy rating in our POWR Ratings system. The stock also has a B grade for Growth, Value, Stability and Quality.
Click here to see UBSFY’s ratings for Sentiment and Momentum as well. UBSFY is ranked #1 of 24 stocks in the Entertainment - Toys & Video Games industry.
Click here to check out our Video Game Industry Report for 2021
TCEHY shares were trading at $77.20 per share on Friday afternoon, down $1.10 (-1.40%). Year-to-date, TCEHY has gained 7.64%, versus a 11.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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