I’d forget RC365 shares! I think these 2 penny stocks could be next

Chalkboard representation of risk versus reward on a pair of scales

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In the middle of June, RC365 Holdings (LSE:RCGH) shares were trading at 25p. They’ve since exploded higher, currently trading at 125p. Clearly, there’s higher volatility when investing in penny stocks. Yet the potential rewards can be huge. Even though RC365 shares could keep flying higher, I’ve probably missed the big move. But here are two other stocks I believe have the potential to rally.

The potential to print profits

In early July, I flagged up the 46% jump in a week for De La Rue (LSE:DLAR). The currency printing and money authentication business released results that were better than the market was anticipating. Added to the mix were comments that it’s seeing a recovery in demand in some divisions.

Over the past year, the stock is still down 45%, so there’s plenty of potential to rally. It’s also worth noting that the share price has traded above 100p during the past year, even though it’s currently at 45p. This is one reason why the company is on my watchlist.

Financial results haven’t been the best recently but I think there’s a strong chance the worst is behind it following the full-year results from last month. New initiatives could add significant long-term value. This includes new Government Revenue Solutions projects with the Middle East, including Bahrain, Qatar and Oman.

The need for cash in society is dwindling, which is an ongoing concern for De La Rue. Yet revenue is growing in other divisions, such as authentication. If the company can continue in the pivot to a more sustainable business model, I don’t see why the pessimism around the stock can’t evaporate.

Waiting for a move

The other penny stock that I’m looking at is Scancell Holdings (LSE:SCLP). The stock has fallen by 24% over the past year, with a share price of just 9.5p.

The company is a clinical stage biopharmaceutical company. Ideally, it needs to be able to take products from research stage, through clinical trials and get them all approved in order to generate sizeable profits.

Currently, the business is loss-making. It doesn’t have any revenue coming in through the door, but has sizeable expenses to fund the research and trials. Although this is a risk, it’s the same practice that all in the same business line go through.

Yet on the other hand, it has £24m cash on hand (as of the latest report). It burned through £4.4m in the previous six months, so it has a big buffer to keep running operations for a while.

In the meantime, I believe it has a good shot at taking either Modi-1 or SCIB1 products to the market in 2024. Modi-1 had a recent 44% disease control rate with test patients of aggressive cancer that had exhausted other options. This shows me that the potential take-up of the product if it reaches the market could be very large. As soon as investors get a smell that this could be the case, I’d expect the share price to rally.

I’m considering investing a small amount of money in both stocks in coming weeks. I’m using a small amount due to the high risk involved. Yet if either replicate the performance of RC365, even a modest sum would be able to generate a healthy return.

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