Risk and reward often travel hand-in-hand, making the stock market both lucrative and dangerous. Among the best exemplars of this axiom are the penny stocks, those equities priced at $5 or less. With that low price comes the potential for extreme gains, as even an incrementally small price increase will translate to a high percentage gain.JPMorgan’s Head of Small and Midcap Equity Strategy, Eduardo Lecubarri, sees both the opportunities and dangers in the current market environment – and the great potential of small-cap stocks that have room to run.“1Q may be rocky following the strong gains since Nov and the fact that valuations are sitting on all-time highs. However, the year long outlook is encouraging due to far more powerful fundamental tailwinds. Such a positive backdrop is likely to keep investors chasing those few stocks that still offer big recovery upside, as they seem to have started to do YTD. It is for this reason that we would encourage investors to build their portfolios now and see things through in the event of any consolidation phase that may come in Q1,” Lecubarri wrote.Taking the risk into consideration, we used TipRanks’ database to find compelling penny stocks with bargain price tags. The platform steered us towards two tickers sporting “Strong Buy” consensus ratings from the analyst community. Not to mention substantial upside potential is on the table. We are talking returns of at least 300% over the next 12 months, according to the analysts.AcelRx Pharmaceuticals (ACRX)Opioids have made headlines in recent years, and for all the wrong reasons. These potent pain relief drugs are also dangerously addictive – a factor that has led to the opioid epidemic in the US. AcelRx is a pharmaceutical company dedicated to the creation of safer treatments for acute pain, developing synthetic opioid drugs for sublingual (under the tongue) dosing.The company’s main product, Sufentanil, was approved by the FDA under the name Dsuvia in 2018, and by the EU as Dzuveo that same year. A second sublingual Sufentanil system, under the name Zalviso, has also been approved for use by the EU, and is in Phase 3 trial in the US.In its most recent earning report, the company showed $1.4 million at the top line, driven by $1.3 million in product sales. The sales figure was up 433% sequentially, and the total revenue figure was up 133% year-over-year.Against this backdrop, several members of the Street believe ACRX’s $1.40 share price looks like a steal.Cantor analyst Brandon Folkes is upbeat on Dsuvia’s prospects as an alternative to current opioid treatments, and he believes that potential will boost the company’s stock.“With the launch of Dsuvia, we believe investor focus can now shift to launch metrics and peak sales potential for the product. As ACRX launches a true alternative to IV opioids, we expect investors to begin to appreciate the value of the product. We believe that Dsuvia offers an advancement in delivery of adequate pain treatment by eliminating the need for an invasive and time-consuming IV set-up in the emergency room, as well as an outpatient, or post-surgery, setting. Despite hospital launches taking time, we expect the uptake of Dsuvia to drive revenue upside beyond the Street’s current estimates, which, in turn, could drive the stock higher from current levels,” Follked opined.In line with his bullish stance, Folkes rates ACRX a Buy, and his $9 price target implies room for a stunning 552% upside potential in the next 12 months. (To watch Folkes’ track record, click here)Turning now to the rest of the Street, 3 Buys and no Holds or Sells have been published in the last three months. Therefore, ACRX has a Strong Buy consensus rating. Based on the $7 average price target, shares could soar 407% in the next year. (See ACRX stock analysis on TipRanks)NuCana (NCNA)NuCana is a biopharma company focused on new cancer treatments. The company’s goal is to provide effective treatments for biliary, breast, colorectal, ovarian, and pancreatic cancers – while avoiding the complications and side effects of current chemotherapy treatments. NuCana uses a phosphoramidate chemistry technology called ProTide to create a class of drugs that will surmount the limitations of the existing nucleotide analogs behind many chemotherapy drugs. NuCana’s ProTides have already been used in Gilead’s antiviral drug Sovaldi.In May of last year, NuCana announced the restart of its Phase III trial on Acelarin, the drug candidate furthest along the company’s pipeline, as a treatment for biliary tract cancers. The study encompasses over 800 patients in 6 countries and is currently ongoing. In November, the company published data described as ‘encouraging’ from the Phase Ib study of the same drug.While Acelarin is the flagship drug in the pipeline, NuCana has two other prospects under development. NUC-3373 is in Phase I trial as a treatment for solid tumors and colorectal cancers, and NUC-7738 is a second pathway under investigation for applications to advanced solid tumors. Of these three, the colorectal study is the farthest advanced.Writing from Truist, 5-star analyst Robyn Karnauskas sees the pipeline as key to NuCana’s investor potential.“We believe investors have overlooked the fact that NCNA is a platform Company that we believe is validated, as defined by the production of clinical products. We like that it has brought 3 products to the clinic, including one novel drug and two improved cornerstone chemos. The data suggest to us that the platform works and can produce better chemos […] While investors are mostly focused on Acelarin, we believe investors should also focus on NUC-3373, another core to our platform-based thesis that has data expected in 1H2021,” Karnauskas noted.To this end, Karnauskas puts a $22 price target on NCNA, suggesting the stock has room for 384% growth ahead of it, along with a Buy rating. (To watch Karnauskas’ track record, click here)Overall, NCNA’s Strong Buy consensus rating is unanimous, and based on 4 recent reviews. Shares have an average price target of $17.33, suggesting a 270% one-year upside from the current trading price of $4.69. (See NCNA stock analysis on TipRanks)To find good ideas for penny stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.