A cheap turnaround penny stock to buy in September!

I’m looking for the best stocks to buy for the post-coronavirus economic recovery. I think this penny stock could be just what I want.

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The impact of Covid-19 lockdowns have been devastating for the hospitality sector. But with UK infection rates seemingly under control, I think Marston’s (LSE: MARS) could be one of the best penny stocks for me to buy today.

Prior to the pandemic, the percentage of spending forked out by Britons on leisure activities was rising strongly. And initial findings on expenditure levels following lockdown rollbacks has been extremely promising.

The experts at Deloitte, for example, note that leisure spending across all categories rose during the second quarter of 2021. And they predict that “the lifting of restrictions, improving weather and the continuation of the summer of sport, could see an acceleration of leisure sector spending during the next few months.”

The news coming out of Marston’s has been encouraging on this front too. Total sales between 17 May and 24 July came in at 92% of 2019 levels.

The pros and cons of buying Marston’s

I don’t just buy UK shares for the short haul though. And in the case of Marston’s I think profit levels could impress long after it’s bounced back into the black (analysts think the pub chain will swing back into profit as soon as next year).

Investment in its 1,500-strong pub estate and in digital technology will allow it to capture bucketloads of custom during the leisure boom. I think this well-run business could also attract another takeover approach in the not-too-distant future.

Shelves holding drinks bottles

Now Marston’s is a stock that does carry a noticeable degree of risk however. Most concerning to me is the penny stock’s net debt mountain which sat at £1.6bn as of 3 April.

This could significantly impact the company’s investment activity for future growth. And it could prove catastrophic if the Covid-19 crisis blows up again and the business has to shutter its pubs again.

There’s also the problem of rising costs, and in particular soaring labour expenses. The introduction of the National Minimum Wage has been a problem for publicans in recent times. But this could be small beer compared to the impact of Brexit on staffing costs as the number of available foreign workers dries up.

A bargain-basement penny stock

Still, I think these obstacles could be baked into penny stock’s low share price right now. As I say, Marston’s isn’t expected to move back into profit until the next fiscal year (ending September 2022). But at 84p per share, the leisure giant trades on a forward price-to-earnings (P/E) ratio of 8 times. This is well inside the widely-regarded bargain territory of 10 times and below.

For a UK share with solid turnaround potential I think this represents top value. An added bonus is that City brokers think Marston’s strong recovery will lead to dividends returning next year. Consequently, the penny stock sports a handy 1.4% dividend yield too.

Despite the risks related to Covid-19, I think this could be one of the best UK recovery stocks to buy today.

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 recommended Marstons. 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.

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