When the overall market conditions are bullish, the movement in penny stocks is like the cryptocurrency world. Individual stocks can deliver multibagger returns in weeks.

This price action was clear during the meme stock frenzy during 2021. Currently, some of the top penny stocks are depressed. However, market movements are cyclical. It’s the best time to accumulate quality penny stocks with quadruple potential. When sentiments reverse, fundamentally strong penny stocks will skyrocket.

I must caution that the markets face several headwinds. This includes inflation, debt ceiling, and a potential recession. Investors therefore need to remain cautious. However, at least 20% to 30% of the portfolio can still be allocated to growth stocks and high-risk penny stocks.

Let’s discuss three penny stocks that can deliver multibagger returns by 2025.

Kinross Gold (KGC)

Kinross Gold (NYSE:KGC) stock is among the top penny stocks to buy with multibagger returns potential.

Given several global factors, I am bullish on precious metals doing well in the coming years. Gold is trading near $2,000 an ounce and it’s likely that the precious metal will make new highs in 2023.

From a valuation perspective, KGC stock trades at a forward price-earnings ratio of 14.4. Further, the stock also offers an attractive dividend yield of 2.34%. Valuations coupled with dividend visibility point to significant upside potential.

Kinross reported operating cash flow of $259 million for Q1 2023. This implies an annualized OCF potential of $1 billion. Further, the company reported a liquidity buffer of $1.7 billion as of March. With high financial flexibility, Kinross is positioned to make aggressive investments.

Currently, the company has guided for stable gold production through 2025. However, acquisitions can change the scenario in terms of production growth. Even with stable production, Kinross is positioned to report robust free cash flows with gold near $2,000 an ounce.

Cronos (CRON)

Cronos (NASDAQ:CRON) stock trades at a big valuation gap and is among the top penny stocks from the cannabis sector.

Cronos Group commands a valuation of $707 million. The company reported cash and short-term investments of $836 million as of Q1 2023.

For Q1, Cronos disappointed on the revenue front. However, there are two positives to note. First, Cronos reported lower EBITDA level losses on operating efficiency. Furthermore, Cronos has guided for positive cash flow in 2024. This is a major stock upside catalyst.

In terms of product offering, Cronos is well diversified. The company offers recreational cannabis products in Canada. Further, wellness products are available in Canada and Israel.

Cronos has also been selling hemp-derived consumer products in the United States. Given the high financial flexibility, I would not be surprised if Cronos pursues opportunistic acquisitions to boost growth.

Bitfarms (BITF)

Assuming a scenario where Bitcoin (BTC-USD) trades above $50,000 by 2025, Bitfarms (NASDAQ:BITF) stock has multibagger potential. The mining stock remains massively undervalued even after a rally of 160% for year-to-date 2023.

My key reason to be bullish on Bitfarms is as follows. For Q1 2023, Bitfarms reported direct cost of one Bitcoin production at $12,500. The low-cost miner will be poised for significant EBITDA margin expansion and cash flow upside if Bitcoin remains in an uptrend.

It’s also worth noting that Bitfarms reported mining capacity of 2.7EH/s in March 2022. For Q1 2023, mining capacity increased to 5EH/s. Bitfarms is targeting further expansion of capacity to 6EH/s by September. Sustained growth in capacity will translate into swelling digital assets.

I also like the fact that Bitfarms has lowered debt by $140 million in the last 10 months. With $19 million in debt as of April and with $41 million in total liquidity, the company’s financial flexibility is robust.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.