Today, I’m looking for the best penny stocks to buy for my shares portfolio. Here are three sub-£1 UK shares I think are great buys today.
Expensive but excellent
Okay, let’s get the bad stuff out of the way first. While I like tech share 1Spatial (LSE: SPA) a lot, its shares don’t come cheap. In fact, an elevated forward price-to-earnings (P/E) ratio of 58 times is the sort of valuation that could cause a share price to come crashing down if news flow suddenly deteriorates.
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However, I think it could be argued that this penny stock is worthy of such a premium. Why? Well, put simply, its technology allows IT users to share and combine data from many sources in different places. This puts it in great shape to ride the growth of remote working following the Covid-19 crisis. In fact, the company’s latest financials last month showed order levels continue to grow at an encouraging rate.
A dirt-cheap penny stock
A strong construction sector bodes well for the profits outlook at Topps Tiles (LSE: TPT) too. This penny stock sells to both the public and trade customers, meaning it’s riding the surge in home improvement projects and the strong housing market to excellent effect. Like-for-like sales on a two-year basis soared 12.9% in the 13 weeks to 26 June, latest financials showed.
Topps Tiles could see sales slump again if the Covid-19 crisis worsens. Not only could the company have to shutter its stores again, but a fresh hit to the economy could damage demand for its products too.
But I believe these threats are baked in at current prices. City analysts think annual earnings here will rise almost 260% in the current financial year to September. This leaves the company trading on a forward price-to-earnings growth (PEG) readout below 0.1.
Oh, and right now, the Topps Tiles share price carries a meaty 4.2% dividend yield. This is superior to the 3.5% forward average for UK shares.
Another bargain UK share
Speedy Hire (LSE: SDY) shares some of the same qualities as Topps Tiles. For example, demand for its rental equipment is rising strongly, thanks to the strength of the British construction industry. The penny stock saw hire revenues in the UK and Ireland slump 11% in the last fiscal year (to March). But revenues climbed 4% in the final three months as trading conditions improved.
Speedy Hire is also a penny stock that offers plenty of bang for your buck. City brokers think annual earnings will rise 38% here in fiscal 2022, resulting in a forward PEG of just 0.4. Any reading below 1 suggests a stock could be undervalued.
On the negative side, Speedy Hire could see sales take a tumble if Covid-19 cases rise to the point at which construction sites are closed and social distancing comes back with a vengeance. Still, at current prices, I still think this is a great-value penny stock to buy.