Canadian Penny Stocks: Can You Get Rich?

If you’re looking for a bargain on the stock market, or you have little money to invest, penny stocks can be a tempting venture. After all, with a low barrier to entry — by definition, $5 or less per share — penny stocks may seem like a safe way to invest your money. 

But don’t be fooled. When it comes to penny stocks, the old saying couldn’t be more true: you get what you pay for. Cheap as they are, penny stocks have dubious prospects for growth, not to mention low market valuations, and if you’re looking to build wealth, penny stocks aren’t the “rags-to-riches” venture many make them out to be. 

So, before you start adding penny stocks to your portfolio, let’s take a step back. What are penny stocks, and are they truly worth the money? Let’s look closely and see. 

What are penny stocks?

Penny stocks are small companies whose market capitalizations are between $50 and $300 million (also known as a micro-cap company) and shares trade for $5 or under. 

Penny stock companies are typically young, small businesses (usually start-ups) with a little fire but no proof their business model will work. They also don’t have deep cash reserves to support them. They typically rely heavily on debt—or unproven technology they hope will propel them forward.

Whatever the reason for their small size, penny stock companies often take huge risks to get off the ground. When you invest in them, you’re essentially betting the company will do the impossible and overcome these major challenges. 

It’s a steep bet. Penny stock companies often fail. Unlike growth stock companies, which are fast-growing companies with potential for success, it’s doubtful penny stock companies will exhibit long-term growth. You can lose money on a growth stock venture, sure. But the danger with penny stocks is losing your entire investment, as these companies can easily go bankrupt. 

Top Canadian penny stocks

While we don’t recommend penny stocks as a principal investing strategy, a few companies could be viable for beginning investors. Here’s just a few penny stocks that have crossed our radar.

All data accurate as of November 19, 2025

1. Baytex Energy

Baytex Energy (TSX:BTE) reported CA$4.21 billion in revenue for 2024, up 24% from the previous year, with adjusted funds flow of CA$1.96 billion and free cash flow of CA$656 million. The company continued strengthening its balance sheet by repaying high-interest notes and lowering credit-facility borrowings to CA$341 million. Through the first three quarters of 2025, Baytex delivered steady operational and financial performance, highlighted by Q3 revenue of CA$927 million and net income of CA$32 million.

The company made headlines recently after its stock surged 32% in a single week, driven by a major strategic shift: Baytex announced a US$2.3 billion (CA$3.25 billion) deal to divest its entire U.S. Eagle Ford asset base. The transaction is expected to close in early 2026 and will place Baytex in a net cash position—an uncommon milestone for a capital-intensive energy producer. Proceeds from the sale will be used to repay all outstanding credit facilities and 2030 senior notes, further enhancing financial stability.

With a stronger financial footing, Baytex plans to maintain dividends, resume share buybacks, and sharpen its focus on its higher-return Canadian assets, including heavy-oil operations across Alberta and Saskatchewan. The company holds more than 2,200 drilling locations and is targeting 3–5% annual production growth supported by a lower corporate sustaining breakeven. For 2025, Baytex continues to plan CA$1.2–1.3 billion in development spending to maintain average production of 148–152 thousand boe/d, prioritizing disciplined reinvestment, shareholder returns, and long-term cash distribution potential post-2026.

For 2025, Baytex plans CA$1.2–1.3 billion in development spending to maintain average production of 148–152 thousand boe/d, focusing on its Eagle Ford and Clearwater assets. The company is prioritizing shareholder returns through debt reduction, disciplined reinvestment, and a variable share-buyback program, while preparing for cash distributions post-2026.

2. Pulse Seismic

Pulse Seismic (TSX:PSD) has quietly transformed from a penny stock trading below $1 in 2021 into one of the standout performers in the small-cap space, recently climbing to around $4 per share. Operating at the intersection of technology and energy, the company provides advanced 2D and 3D seismic data to oil and gas explorers—a business well positioned to benefit from stable commodity prices and renewed focus on North American energy security.

The company’s fundamentals have surged dramatically, with revenue up 172% year-over-year and earnings rising more than five-fold in the first half of 2025. Despite this explosive growth, Pulse Seismic still trades at an attractive valuation—under 10 times trailing earnings—and even offers a nearly 2% dividend yield. Its strong margins and efficient operating model make the stock’s rise look justified, especially given how quickly growth is flowing through to the bottom line.

While the energy exploration sector can be volatile, Pulse Seismic’s combination of rapid revenue expansion, compelling valuation, and ongoing demand for seismic data positions it as a hidden gem. For investors seeking a small-cap name that has evolved far beyond its penny-stock past yet still offers meaningful upside, Pulse Seismic remains a compelling long-term opportunity.

3. Sylogist

Sylogist (TSX:SYZ) is a Canadian SaaS company serving government, nonprofit, and education customers, and despite being down nearly 50% from its all-time highs, the stock offers compelling upside heading into November 2025. The company trades at an attractive valuation with a market cap of just $130 million, yet its fundamentals continue to strengthen as it completes its transition from legacy software to a modern, cloud-based subscription model.

In Q3, Sylogist reported a 12% year-over-year increase in SaaS subscription revenue, with SaaS now representing 73% of recurring revenue. Annual recurring revenue climbed to $45.8 million, supported by a solid 106% net revenue retention rate and growing partner-led sales traction. While project services revenue declined and adjusted EBITDA margins compressed due to this strategic shift, the transition supports stronger long-term margins and scalability as more of the business moves fully into high-value SaaS delivery.

Looking ahead, analysts expect Sylogist’s revenue to climb from $63 million in 2025 to $124.4 million by 2029, with free cash flow rising from $4.7 million to $32.3 million. If the stock reaches a valuation of 10 times projected free cash flow, it could appreciate by more than 150% over the next three years—positioning Sylogist as a potentially undervalued rebound opportunity in the Canadian tech sector.

Can you get rich from penny stocks?

Penny stocks are, well, stocks. As such, you can earn money by investing in them. That said, it will be a real challenge if you expect to earn significant wealth, let alone get rich, on penny stocks alone. 

To understand why, consider the most common way penny stock investors make money: short-term gains. Unlike growth and value stock investing, which involve looking for companies that will demonstrate long-term upward growth, penny stock investors want companies that will hit it big in a short period of time. When that spike comes (if it does), the penny stock investor typically sells their shares to make a quick gain. 

The problem with this? For one, we’re talking about penny stocks. Even if a penny stock worth $5 hit a 100% gain, you’d still only earn $5. To get rich off penny stocks, you have to trade at high levels, and even then, you probably won’t earn as much as you would in a good growth stock. 

The second problem is consistency. You may earn a quick profit off a handful of penny stocks, but rare is the investor who can do this frequently over long periods of time. Those that do are professionals, meaning they invest significant amounts of time and money (even professionals lose) in penny stock ventures. Unless you’re prepared for that kind of investing style, you shouldn’t expect to earn wealth off penny stocks alone. 

If you have extra money and you want to try penny stocks, by all means — give it a whirl. But if your goal is to invest for retirement, or you’re new to investing, penny stocks aren’t the smartest option for you. 

How to find penny stocks

Because of their size, most penny stocks don’t meet the requirements to be traded on major market exchanges, such as the Toronto Stock Exchange (TSX). Instead, penny stocks are sold over-the-counter (OTC), such as on an over-the-counter bulletin board (OTCBB) or “pink sheets.” 

When a penny stock company is listed on an OTCBB, it must meet certain requirements. For instance, it must keep up-to-date information on its finances and make financial records available for traders to review. Pink sheets are a different story.

When listed on pink sheets, penny stock companies don’t have to reveal information on their finances. For this reason, buying penny stocks on pink sheets is considered extremely risky, as you won’t know much about the companies you’re buying. 

How to trade penny stocks in Canada

Here are four steps to trading penny stocks in Canada:

1. Open a brokerage account that buys and sells penny stocks

Since penny stocks are traded OTC, you’ll have to find an online brokerage that will buy and sell penny stocks on your behalf. Many will offer this service, but check your online brokerage ahead of time if this is something you’re interested in. 

2. Buy penny stocks

Once you have a broker who will conduct penny stock trades, you buy penny stocks as you would normal stocks: fund your account, choose your penny stock company, and place an order. 

3. Sign a risk disclosure

Because of the risks that penny stocks impose, you typically may have to sign a disclosure with your broker before you start buying them. They’ll usually send you a document detailing the risks, and once you review and sign it, your broker will allow you to trade penny stocks. 

4. Make sure you aren’t charged commissions

Finally, if you’re serious about trading penny stocks, make sure your broker doesn’t charge commissions on penny stock transactions. Since you probably won’t earn much on penny stocks anyway, you don’t want to give away your precious gains to extra investing fees. 

What sectors are penny stocks usually in?

In Canada, you’ll likely find most penny stocks in the following markets:  

• Cannabis
• Mining
• Oil & gas 
• Technology 
• Pharmaceuticals 

How risky are penny stocks?

Short answer: very, very risky. The risks of penny stocks are numerous and include:

• Insolvency – Penny stocks are little-known companies that have yet to prove themselves on the larger market. They can (and often do) go out of business. 

• Highly speculative – Often, you’re investing in an idea or concept, not a company with solid fundamentals.

• Traded “over the counter” (OTC)s – The OTC market lacks the same rigorous reporting as larger exchanges, and you could have less visibility into your company’s operations.

• Thinly traded – There could be less liquidity in penny stocks, meaning it could be difficult to sell your shares at the time that you want.

• Target of scams – Many con artists will build up a penny company—through social media or some other means—to artificially inflate the stock price. When the price is high enough, they’ll sell their shares. Called “pump and dump,” this scheme could bamboozle investors into buying a bad stock for a terrible price. 

How long should you hold penny stocks?

At The Motley Fool, we recommend you hold a stock for a minimum of 5 years. But penny stocks are a different beast—they require a short-term strategy, which is why we don’t recommend investing in them.

Common investing advice would tell you to hold a penny stock for no more than 6 months. Some investors, however, might recommend holding a penny stock for no more than 6 seconds. Penny stock investors sell so quickly because they’re only waiting for a very minuscule gain—a few pennies will do. Once the penny stock reaches that “height,” the investor sells. That could be 6 minutes, 6 hours, or 6 days. 

Again, at The Motley Fool, we believe in long-term investing. If you’re a long-term investor, you look for great companies that have strong business fundamentals and will likely increase in value over time. If you have some extra money to play with penny stocks, that’s okay, as long as penny stocks don’t make up a large portion of your holding.

What’s a better alternative to penny stock investing? 

A better approach to stock investing, especially for beginner investors, is to invest for the long term. That means finding high quality stocks, such as undervalued stocks, good growth stocks, or even stocks that pay out consistent dividends, and holding onto them for the long haul. Additionally, you could diversify your portfolio by investing in a solid fund, such as an exchange-traded fund (ETF). 

Another alternative to penny investing is to buy fractions of a stock. You may not have thousands of dollars to buy a full share of Shopify or Amazon. But with fractional investing, you can buy a small amount and still benefit from the company’s growth.