Why this FTSE 250 penny stock could double my money in 1 year

The FTSE 250 penny stock has already doubled its share price over the past year and may do it yet again. Here’s why that could be.

| 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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A lot of stocks has shown good growth over the past year. Last year at this time, the stock market rally was just about to start. But no one knew it at the time. So, many stocks were at rock bottom prices, surrounded as they were, by extreme uncertainty with regards to what would happen next. But even by those standards, this FTSE 250 penny stock has performed particularly well. 

FTSE 250 stock with standout performance

I am talking about the Mitie Group (LSE: MTO), whose share price has more than doubled. This is in stark contrast with many other stocks that also recovered from November last year but that have seen sharp share price corrections in recent months. In fact, in another article today, I wrote about the FTSE 100 industrial metal miner Rio Tinto, which performed very well earlier in 2021, but whose share price has now dropped to almost the same levels as this time last year. 

Mitie Group sees a return to profits

So what is making the Mitie Group tick where others are seeing dwindling fortunes at the stock market? This question is pertinent for me, because as a potential investor I need to know if there is still steam in the stock or it is just being carried forward by momentum that will die out sooner or later. 

I think the company has something to say for itself. It provides facility management services that include security, cleaning, engineering, and catering among others. Partly thanks to the fact that the economy has come back to life and partly due to the fact that demand for its cleaning services remains elevated in a pandemic-conscious environment, the company’s prospects look bright. It has raised its profit guidance for the year ending 31 March 2022. 

Share price expected to double

Analysts are super-bullish on the stock. Even the most pessimistic analysts expect its share price to rise by 20% from the present levels in another 12 months as per numbers compiled by the Financial Times. And the most optimistic among them actually expect its share price to more than double again in the next year. If that happens, it will indeed be a standout stock that did well irrespective of whether a stock market rally was there or not. The catch of course is that analyst estimates are subject to change, because circumstances keep evolving. 

The red flag and takeaway

Speaking of which, there is one red flag I found when analysing the stock that indicates that all may not be smooth sailing for the company in the future. Mitie Group has struggled with profits in the recent past. It has reported losses in three of the past five years. So even if I ignore the last year considering that it was a difficult one for the entire economy, it still does not have a long-term trend of turning in profits.

But right now, things look good for Mitie. This penny stock continues to be a buy for me. 

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 assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »