Investors looking for penny stocks to buy for recovery have some interesting choices among those reporting in September. I’ve already covered three under a pound that I intend to examine further. Today, I’m picking three more for closer scrutiny. But I’m also bearing in mind that penny stocks can be riskier investments than the giants of the FTSE 100.
The first is cleaning products maker McBride (LSE: MCB), due to deliver a full-year report on 7 September. But even before we get to see it, it’s being eclipsed by an August trading update for the next year.
Due to uncertainties regarding raw materials, the company decided in July it wouldn’t offer any 2022 outlook guidance. McBride now says it expects first half EBIT to be around break-even, with profit “heavily weighted towards the second half.”
Pre-tax profit for 2021/22 should drop to around 55-65% below the current 2021 consensus, with debt at 30 June 2022 around 5-10% higher. The share price took a dive in response, though it’s pulled back a little bit since. Despite that, McBride shares are still up more than 30% over the past 12 months. So there’s still some investor confidence there.
Once supply difficulties are passed, I think McBride could have a better future ahead of it. But, for now at least, it’s a penny stock for me to watch and wait.
Pandemic profit boost
EKF Diagnostics (LSE: EKF) shares have had a cracking time during the pandemic. They’re up more than 150% over the past two years, though still at penny stock levels. Interim results are due on 14 September, and an update in July told us to expect “H1 2021 performance in-line with already upgraded management expectations.”
EKF told us its trading reflects “ongoing strong demand for our contract manufacturing services for Covid-19 sample collection devices and associated kits.”
The half is expect to deliver adjusted EBITDA around £12.75m, up from £8.93m a year previously. Cash, net of borrowings, stood at £20.39m at 30 June. Oh, and there’s a 1.1p per share dividend coming, in line with the company’s “modest but progressive dividend policy.”
The board’s hoping for “significant double-digit growth in adjusted EBITDA over the next 3 to 4 years,” even aside from Covid-related revenue. Will I buy? Not without seeing the full results and thinking hard about the stock’s valuation. But I’m definitely adding EKF to my candidates list.
Penny stock troubles
Double glazing firm Safestyle UK (LSE: SFE) is my final penny stock pick, with H1 results scheduled for 23 September. The Safestyle share price has been hovering in the 50-60p range for the past couple of months. But that’s after falling back from nearer 70p in May.
Overall, the stock hasn’t done too badly in the pandemic, up a bit above 10% in two years. But that hides longer-term difficulties, with the shares having lost nearly 80% of their value over the past five years. That’s not really surprising, seeing the earnings collapse of the recent past leading to three years of losses.
July’s trading update told us to expect H1 revenue of about £72.9m, up 13% from pre-pandemic 2019. That seems positive, and the £14.4m net cash at 4 July is another good sign. And the firm said it’s “now generating sustained positive net cash inflows.”
I’d still want to see firm evidence of a sustained turnaround before I’d buy though. It’s wait and see again for me.
Alan Oscroft 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.