While most of my portfolio is invested in blue-chip shares like Amazon and Apple, I do keep an eye on the penny stock universe. These securities are risky, however, they can offer the potential for huge gains.

Now earlier this week, I screened the market for penny stocks that look interesting right now (growth potential, an attractive valuation, and share price momentum) and I got a number of results.

However, one name jumped out and I ended up buying the stock for my Stocks and Shares ISA.

A top-performing penny stock

The stock was MTI Wireless Edge (LSE: MWE). It’s a small Israel-based company that specialises in antenna technology and also operates in the areas of water control and management and distribution and professional services.

Today, this company’s having a lot of success selling antennas to the defence industry (both to companies and governments). For example, in April, it signed over $9m worth of defence-related contracts (bear in mind that the company’s only worth about £60m).

This operational momentum’s rapidly pushing its share price up. Year to date, the stock’s up about 50% versus a gain of around 4% for the FTSE 100 index.

It’s still attractive-priced though. Right now, the share price is only 70p, which means that £1,000 buys around 1,429 shares (ignoring trading commissions).

An attractive set-up

At 70p, I believe this name’s worth a look if an investor’s seeking exposure to the penny stock universe. Because, to my mind, the risk/reward proposition’s attractive.

For a start, we have growth potential due to the company’s exposure to the defence industry (note that NATO countries are currently ramping up their spending budgets). In April, MTI’s CEO Moni Borovitz said: “We continue to see opportunities for securing further orders primarily for our range of defence related products but also from across the entire business.”

We also have profitability (which many penny stocks don’t), which reduces investment risk a bit. This year, analysts expect the company to generate a net profit of around $5m and earnings per share of $5.80 cents.

Additionally, we have an attractive valuation. Taking that earnings per share forecast above, we get a forward-looking price-to-earnings (P/E) ratio of just 16.

Adding weight to the investment case is an attractive dividend yield. Currently, we’re looking at a yield of around 4%, so there’s income potential here too.

Worth a closer look?

So overall, there’s a lot to like. To my mind, this company has all the right ingredients to be a good long-term investment. Of course, there are no guarantees it will be. If orders/deals suddenly dry up and revenue growth stalls, the share price could drop.

I see a lot of potential though. I think investors should consider doing some further research on it.