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2 penny stocks I think could be too cheap to miss!

British Pennies on a Pound Note
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As a long-term investor I’ve made exposure to emerging markets an important part of my investment strategy. I’m confident that rapid economic growth in many so-called new regions could supercharge my returns over the next decade. I’m thinking of buying penny stock X5 Retail Group (LSE: FIVE) today to help me achieve this goal.

X5 is a heavyweight in Russia’s supermarket industry. It owns the Perekrestok brand, the country’s biggest grocery chain, and operates thousands of convenience stores under the Pyaterochka banner. While I expect spending at these outlets to rise as personal income levels steadily improve, this wouldn’t be my main motivation for buying the penny stock.

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Indeed, I think the colossal amounts X5 is investing in e-commerce will pay off particularly handsomely. Like almost everywhere else, online spending in Russia soared during Covid-19 lockdowns. And the low penetration of e-commerce among Russian shoppers compared with other regions means that the growth potential here is especially colossal. Analysts at Statista predict Russia’s online retail market will treble in size between 2020 and 2024.

An ultra-cheap penny stock

Under its brand, X5 opened a new ‘dark store’ in Moscow last month to capitalise on this growth potential. It’s the largest such store in the whole of Russia and will eventually be able to execute 8,000 orders every day. This followed the expansion of its delivery network to new regions earlier this year, giving it access to around two-thirds of Russia’s population.

Latest financials showed X5’s revenues rocketed 11.7% year-on-year between July and September. It’s perhaps no surprise then that City analysts reckon the retailer’s earnings will jump 57% in 2021. This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of just 0.2.

It’s true that current broker forecasts could be blown off course if Russia’s economy suddenly hits trouble. Soaring Covid-19 infection rates in the country could certainly cause conditions to worsen.

Flying high

Still, it’s my opinion that this danger is currently baked into X5’s ultra-low share price. It’s a view I also believe extends to Raven Property Group’s (LSE: RAV) current valuation. City analysts think this particular penny stock will swing back into the black in 2021 following last year’s losses. Consequently, this Russia-focussed company trades on a forward price-to-earnings (P/E) ratio of below 4 times.

Raven Property invests in warehouse spaces across several major Russian cities, including Moscow and St Petersburg. It’s a part of the property market which I think will also enjoy explosive growth as e-commerce in the country booms. These sort of spaces are essential in allowing retailers, manufacturers and delivery companies to reach their customers.

I think the market is ripe with opportunity for Raven Property, although a failure to secure quality properties could see it fail to make the most of the online shopping boom. Like X5, I’d happily buy this penny stock for my shares portfolio today.

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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.

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