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When it comes to penny stocks, there’s always that mix of excitement and danger. The rewards can be huge if an early bet pays off, but the risks are equally significant. Many such companies trade at low valuations for a reason — fragile balance sheets, inconsistent revenues or simply operating in highly competitive sectors.
Still, I think there are moments when a penny stock deserves a closer look.
This September I’ve been keeping tabs on two names that have made promising progress recently. Sure, they come with risks, but for investors seeking growth opportunities, I think they’re both worth considering.
Pharos Energy
Pharos Energy (LSE: PHAR) has been quietly building momentum. The share price is up 66.7% in the past five years and the company has managed to maintain dependable revenues along the way.
Plus, with a dividend yield of 5.6% supported by a modest 27.5% payout ratio, income investors may also find this attractive.
Valuation-wise, Pharos looks cheap. A price-to-earnings (P/E) ratio of 4.9 suggests the market isn’t placing a high premium on earnings, which could make this an undervalued energy stock to consider. Importantly, earnings growth has been strong, pushing net margins up to 17.3%.
One of the most encouraging updates came with the extension of its licences for Vietnam oil and gas fields through to 2032. That provides much-needed certainty over future production and revenue streams. Meanwhile, the business has almost eliminated its debt, cutting borrowings from £62m three years ago to close to zero today.
The main risk, though, comes from liquidity and the balance sheet. Short-term liabilities of £108m outweigh current assets of just £59m, giving it a bloated quick ratio of 3.66. If cash flow dried up, the firm could quickly find itself under pressure. For that reason, investors should still tread carefully.
But given the improvements to profitability and debt reduction, it’s a stock worth watching more closely.
hVIVO
Clinical research specialist hVIVO (LSE: HVO) is another penny stock making waves. Known for its human challenge trials, it recently posted a strong trading update for the first half of 2025. Revenue came in at £24.2m, keeping it on track for full-year expectations of £47m. The group also had a healthy £23.3m in cash as of 30 June 2025.
Growth has been supported by a healthy sales pipeline, with several large human challenge trial opportunities in advanced discussions. The company has also been expanding its offering, with clinical site and hLAB services gaining traction. Recent acquisitions of CRS and Cryostore added another £5.5m to group revenue in the first half alone.
But as with many biotech stocks, there are risks. Financing across the biotech sector remains under pressure, which could reduce client spending on trials. High fixed operating costs mean hVIVO needs strong contract flow to cover expenses. More critically, its revenue is heavily dependent on converting contracts and avoiding delays. A single cancellation can have a big impact, making forecasting difficult.
Still, with relatively low debt to equity, strong cash reserves and an expanding portfolio of services, I think it’s an intriguing stock for investors to consider – if they’re comfortable with potential volatility.
