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Penny shares are often seen as riskier than usual, and they can be. That means it can fall more than anything else when the market is down and investors are looking for safety.
Does that mean it’s a good time to buy penny stocks now? With care, yes, it is.
I see three here with market caps between £50m and £100m, and share prices between 50p and 70p. All of them are listed in Alternative Investment Market (AIM).
Investment
Ebiquity (LSE: EBQ) provides investment analysis and marketing analytics.
We have seen losses over the past few years. But the forecast shows profits for 2022, with results due on March 30.
Revenue was reported to be up 20%, with organic revenue up 9%. Operating margin of 12% was up four percentage points on the previous year.
There is £8.9m of net debt. But against a market cap of £63m, that looks good to me.
Profit forecasts suggest a price-to-earnings (P/E) ratio of around 20. And that’s not necessarily cheap. But if the outlook for the next few years is accurate, we could see only about seven in 2024.
Ebiquity’s business should be vulnerable to the ongoing economic downturn, and I think this is the biggest risk.
But if the profits stay current, I think it could be a long-term buy.
Lithium
CleanTech Lithium (LSE: CTL) will float on AIM in March 2022 at 30p. Since then, it’s up 66%.
The company has two lithium prospects in Chile. And any investment plays in the future demand of the battery business.
There is no profit on the table yet. Or, in fact, any revenue. So CleanTech has to be the riskiest of the three. But I have some things in my favor over competing lithium explorers.
Operations in Chile appear to be stable and non-controversial, and have abundant renewable energy resources.
And thanks to the IPO and subsequent cash-raising activities, it looks well-funded at the moment.
The success of the investment will depend on how long CleanTech is profitable. And the forecast is not far off. But I was tempted to risk a small amount.
Property
Property sharing seems like poison these days. and OnTheMarket (LSE: OTMP), which provides a residential property portal for buyers, sellers, landlords and tenants, has suffered.
The company has had a very difficult few years, and the shares have been in a long, slow slide.
And, well, the 2023 outlook for the property market isn’t the brightest I’ve seen. But estimates suggest it could be a back year for the company.
OnTheMarket’s year ended in January, and the latest trading update looks good. Operating profit should be between £4m and £4.5m (up from £2.7m).
And there is £10.4m in cash on the books, with no debt.
The forecast shows a big increase in profits, which can put the P / E to around nine by 2025. Even with today’s property risk, I think it’s cheap.
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