Last May, UK shares were still reeling from the impact of the stock market crash. Because bears ruled the day, their share prices were still quite low. But one year later, they have recovered quite a bit and that includes many penny stocks.
N Brown shows sharp share price rise
One of them is the penny stock N Brown (LSE: BWNG), which is up 283% over the year. Yet its share price is still way below the highs at which it started 2020.
Considering that the UK lockdown easing is in full swing and the outlook for the consumer economy is full of optimism, it would appear that N Brown’s prospects are brighter now.
Consider pre-crisis trends
But I would take a step back before assuming this. The fact is that unlike other FTSE stocks, this penny stock started falling way before any stirrings of the stock market crash were visible. In January 2020 alone, its share price lost half its value.
This can be correlated with its weak performance even pre-2020. Its first update in 2020 was for the 18 weeks ending January 4 2020, when it reported a 5% revenue decline. This followed a 5.4% fall in its half-year report earlier in 2019. It had also already seen a double-digit debt increase.
Weak financial performance
After the coronavirus crisis of last year, it is no surprise that it is in an even weaker position. But I think that the clothing and homewares provider can begin to recover from here, going by the apparent pent-up consumer demand. At the same time, I would like to see that in its numbers before buying the stock. If it continues to stay weak despite a strong economy, I am not sure I can bet on its recovery.
Angling Direct posts strong results
At the other end of the spectrum is fishing equipment retailer Angling Direct (LSE: ANG) that reported fantastic full-year results for the year ending January 31 earlier today. Its revenues were up 27% and pre-tax profits were up a whole 279%, more than wiping out the losses from the year before.
Its financial year 2022 has also started strong. Additionally, its share price is robust, but still below all-time-highs seen in 2018. It has a price-to-earnings (P/E) ratio of around 26 times after its latest results, which in the present investing environment suggests to me that its share price can rise further.
It is a relatively illiquid stock, so buying and selling it may be less easy than that for big FTSE 100 stocks. Its share price performance has also been somewhat erratic overtime, though it is up 45% in the past year.
Overall, I think that its financial performance in a year when retailers were challenged is noteworthy. It has upgraded its online platform, opened four new stores and is looking to expand in new markets in Europe. It is a buy for me.
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Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.