1 nearly penny stock I’m considering right now!

Jabran Khan details this former penny stock and decides if he would add shares to his holdings or avoid them at current levels based on the outlook ahead.

| 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.

British Pennies on a Pound Note

Image source: Getty Images

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.

First Group (LSE:FGP) is one nearly penny stock I’m currently considering for my holdings. Here’s why.

Transport provider

First Group is one of the UK’s largest transport providers. As well as its UK operations, it has a presence in North America too. In the UK alone, First Group has over 30,000 employees and carries upwards of 700,000 passengers a day via its bus and rail operations.

A penny stock is identified as one that trades for less than £1. First Group shares are trading for 105p, hence my calling it a “nearly penny” stock. At this time last year, the shares were trading for 78p, which is a 34% return over a 12-month period.

Risks involved

The pandemic threw up a myriad of problems for First Group. Due to restrictions, customer numbers dropped substantially but costs remained. This led to performance being negatively affected and it needed to borrow cash to keep the lights on. Companies with lots of debt usually put me off, unless they have a way to service and pay down said debt. I believe First Group is well placed to do this due to its vital place in the UK’s transport infrastructure. However, new variants could lead to new restrictions and another drop in passengers. This could once more put pressure on the balance sheet.

Recent labour shortages here in the UK, such as a shortage of bus drivers, could also place unnecessary pressure on First Group’s operations. Reduced or affected operations could affect performance as well as consumer confidence.

A nearly penny stock I’d buy

I believe First Group’s position in the UK’s transport infrastructure is one of its biggest strengths. It possesses a large presence throughout the UK, in all major towns and cities, and possesses a large market share in its respective sector. As reopening continues, its operations could be vital to getting the public around, back to work, schools, and stimulating the economy. 

A bonus factor I like about First Group is its recent commitment to cut harmful emissions and move towards greener vehicles. There has been a rise in ethical investing in recent times and more firms are focusing on reducing their carbon footprints.

First Group also has a good track record of recent and past performance, barring the pandemic period. I do understand past performance is not a guarantee of any future performance, however. In its most recent half-year report, announced in December, it revealed good progress financially and operationally. It reported that revenue increased by 8% and operating profit by a mammoth 162% compared to the same period last year. In addition to this, earnings per share increased and debt levels reduced. Operationally, passenger numbers are edging closer towards pre-pandemic levels.

There is lots to like about First Group, in my opinion. It has a good track record of performance and recent results look good to me. Its crucial position in the UK transport network as well as other international operations lead me to believe it will continue to grow and perform well. I would add the shares to my holdings and believe it is an excellent nearly penny stock.

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.

Jabran Khan 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

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

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

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

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »