2 of the best penny stocks to buy now

I think these two UK shares could supercharge returns from my Stocks and Shares ISA. Here’s why they’re two of the best penny stocks I could buy today.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

I’m searching the UK share markets for the best cheap stocks to buy for my Stocks and Shares ISA. Here are two top penny stocks — companies that trade for less than £1 a share — that are high on my shopping list.

On a roll

Accrol Group Holdings (LSE: ACRL) is being hit by the cost of soaring pulp values and commodity prices right now. It’s a problem that might drag on too as the economic recovery kicks in and supply issues persist. But I think these problems are built into the toilet and kitchen roll manufacturer’s shares at current prices. Today the company trades on a forward price-to-earnings (PEG) ratio of 0.3.

A reading below 1 suggests that a share could be undervalued by the market. And I for one certainly think Accrol has a lot of promise looking ahead. Indeed, the company is rapidly gaining market share as the popularity of discount retail continues to rise. The penny stock grew its market share by three percentage points to 16% in the last fiscal year as consumers opted for cheaper products over the branded equivalents.

I also like this UK share’s ambitious spending programme to drive future earnings. It’s made two acquisitions since the end of last year for a combined £38.9m, including the significant purchase of Leicester Tissue Company in November. And Accrol is also taking steps to boost capacity at its manufacturing site in Leyland in early 2022.

Hand holding pound notes

Another top penny stock to buy

I believe that Ryanair (LSE: RYA) is another penny stock with a bright future. And so do City analysts if current forecasts are to be believed.

The Irish flyer swung to a painful operating loss of $839.4m in the last fiscal year (to March 2021) as the Covid-19 crisis grounded most of its fleet. But City brokers believe that Ryanair is set for a strong rebound. Operating earnings of €56.1m and €1.69bn are forecast for financial 2022 and 2023 respectively.

The risks to these forecasts are significant, of course, as the public health emergency drags on. Still, I’m not deterred by the possibility that near-term profits could suffer if travel restrictions persist. Firstly, Ryanair has plenty of financial headroom to help it fly through the pandemic. A mixture of extensive cost cutting and fundraising helped it exit the last financial year with €3.15bn worth of cash on the books.

These considerable resources should also allow Ryanair to ramp up capacity swiftly as the Covid-19 crisis gradually eases. They will also help the penny stock realise its plans of flying 200m passengers a year inside the next five years. By comparison it shifted 142m travellers back in 2019.

Make no mistake: the low-cost travel segment looks on course to keep growing at a tremendous rate. And Ryanair’s bold investment plans could turbocharge profits from a marketplace in which competition is set to be greatly reduced following the pandemic.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Royston Wild 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.

More on Investing Articles

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

UK shares are cheap! So why is Warren Buffett ignoring them and should you too?

Many British shares are trading cheaply and pay dividends. This is normally the hunting ground for Warren Buffett, yet he's…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How I’ve increased my passive income by 600%

Finding the right opportunities can bring spectacular results. Here’s how our author has managed to increase his monthly passive income…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Could lithium shares make my Stocks and Shares ISA a goldmine?

Our writer is considering buying lithium shares for his Stocks and Shares ISA. Here, he outlines the decision process he…

Read more »

British Pennies on a Pound Note
Investing Articles

Is now a great time to start buying penny shares?

Are stock markets set for a rebound? If they are, there are plenty of penny shares around that might be…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Can the Lloyds dividend survive a recession?

The Lloyds dividend has been growing strongly. But its history is more alarming. Christopher Ruane explains why he sold his…

Read more »

Electric cars charging in station
Investing Articles

I’m buying this under-the-radar income stock with explosive growth potential

Our author thinks he’s found a winning lithium stock that’s flying under the radar. It’s a steady income stock that…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Are Rolls-Royce shares finally about to climb?

Rolls-Royce shares have been falling again. But I can't see that much has changed, and the full-year outlook still appears…

Read more »

Serious puzzled businessman looking at laptop
Investing Articles

When should I sell my Scottish Mortgage shares?

Buying some Scottish Mortgage shares was an easy decision for me. But I've never been any good at knowing when…

Read more »