The Australian stock market has shown resilience, climbing back above the 7,800 points level despite mixed signals from global markets. Penny stocks may be an outdated term, but they continue to offer intriguing opportunities for investors seeking growth at lower price points. By focusing on companies with strong balance sheets and solid fundamentals, investors can uncover hidden gems that could provide both stability and potential upside in today's market landscape.

Click here to see the full list of 984 stocks from our ASX Penny Stocks screener.

Let's review some notable picks from our screened stocks.

Simply Wall St Financial Health Rating: ★★★★★★

Overview: Hearts and Minds Investments (ASX:HM1) is an Australian-listed investment company with a market cap of A$618.25 million, focusing on generating long-term capital growth by investing in high-conviction ideas from leading fund managers.

Operations: The company generates revenue of A$191.25 million from its investment activities.

Market Cap: A$618.25M

Hearts and Minds Investments has demonstrated significant earnings growth, reporting A$137.51 million in revenue for the half-year ending December 2024, a substantial increase from the previous year's A$25.99 million. The company is debt-free with short-term assets significantly exceeding liabilities, providing financial stability. Despite a low return on equity at 16.1%, its price-to-earnings ratio of 4.8x indicates potential undervaluation compared to the broader Australian market average of 17.1x. However, concerns about dividend sustainability exist as current payouts are not well covered by free cash flows, and management's relatively short tenure may impact strategic continuity.

• Get an in-depth perspective on Hearts and Minds Investments' performance by reading our balance sheet health report here.

• Examine Hearts and Minds Investments' past performance report to understand how it has performed in prior years.

Simply Wall St Financial Health Rating: ★★★★★☆