1 rising penny stock I’d snap up today!

I have added penny stocks to my portfolio in the last month. The reason is that FTSE AIM All-Share the index is down 34% since September 2021. I think this gives me a chance to buy. And despite the risk, I’m ready to invest in this promising penny stock.

A fashionable niche

Sosandar (LSE: SOS) is a British designer and retailer of women’s clothing. The online company sells own-brand products designed in-house. It describes its customers as “style-conscious women who have graduated from price-driven alternatives“.

That is, women who have moved beyond fast fashion provided by the like boohoo and ASOS. The company believes that this demographic is underserved. The new strong financial results seem to justify that belief, as the fashion retailer enjoyed a record period for the end of December.

Revenue increased by 30% year-on-year to £11.6m. The company is growing in every product category, with knitwear, formal tailoring, suits and party wear performing exceptionally well in winter.

This period of solid trading also marked the fifth consecutive profit for the business. It expects full-year revenue of £42.8m, with a pre-tax profit of £2m.

On the balance sheet, the company has net cash of £4.6m.

Fashion savvy founder

Various British celebrities are regularly seen wearing Sosandar clothing. These include TV presenters Holly Willoughby and Fearne Cotton, as well as actresses from soap operas Coronation Street.

A large part of the brand’s popularity can be explained by the background of founders Alison Hall and Julie Lavington. He is the editor and publishing director Take a look magazine, a UK women’s fashion and celebrity publication.

He left the magazine to form Sosandar in 2016 and became co-CEO. Needless to say, they have the perfect knowledge of what style of clothing suits their customers. The brand has built a loyal and large customer base, along with a very strong social media presence.

Sainsbury’s partnership

Sosandar’s last quarter also set a new record for sales through third-party partners. The retailer already has partnerships with the likes of John Lewis, Marks and SpencerThe Very Group and Next.

And the company recently announced it had signed a deal with the supermarket giant Sainsbury’s. It will see a selection of clothes sold online, before moving to selected Sainsbury’s stores later this year. Importantly, this gives Sosandar a physical store for the first time.

All this positive news has caused the share price to rise 18% since the beginning of the year. However, over a year the stock is down 13%.

At 23p per share, Sosandar now sports a market capitalization of £52m. Based on forecasted 2023 earnings, the stock has a forward price-to-earnings (P/E) ratio of 31. I don’t think that’s a very exciting range for a fast-growing brand.

It’s not without risk, of course. The macro-economic environment remains challenging for all fashion retailers. Sales can take a hit during a recession.

But in the long run, I don’t understand why this brand can’t grow beyond its core UK market and expand overseas. Overall, I am quite encouraged to start a small position in this penny stock in the coming days.