This green energy penny stock is trading for 1p! Should I buy it now?

Jabran Khan looks at whether he should add this dirt-cheap penny stock to his holdings with the current focus on green energy.

| 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.

Penny stock Powerhouse Group (LSE:PHE) is one of a number of firms in the burgeoning green energy space.

Recently, there has been a huge impetus on cutting carbon emissions and looking at green energy alternatives.

Should I look to get in early on this potentially lucrative space by adding cheap shares to my holdings? Let’s take a closer look.

A dirt-cheap penny stock

For a bit of context, Powerhouse designs and develops clean energy recovery technology. It enables the disposal of waste streams and re-using this waste by converting to gas to be utilised in other areas. One of its prominent products, its Distributed Modular Generation platform, allows the regeneration of plastic to power and hydrogen.

I find it rare to come across established businesses in the penny stock category that actually trade for a penny. Well, in Powerhouse’s case, that is true. As I write, the shares are trading for 1p. Such is the volatility of small-cap stocks, the shares have fallen since this time last year when they were trading for 5p. The stock market correction and macroeconomic factors won’t have helped.

The bull case

So what are the potential upsides to me buying the shares for my holdings? Well first of all, the waste-to-energy market is currently lucrative and expected to grow. It is estimated that the sector is worth over $30bn today and is set to nearly double in the next five years. Powerhouse could be ready to reap the rewards of such growth, especially with its already established current technology.

Green energy and alternatives to traditional fuels are high on the agenda of governments worldwide. Many directives to cut emissions and produce alternatives that do less harm to the environment are in place and gaining traction. Powerhouse could be primed to benefit from this action, which could boost performance and returns in the long term.

An example I found of Powerhouse’s capability is its Protos project in Cheshire, which will be set to power 250,000 homes from 2024. Powerhouse continues to develop its technology and partner up with other businesses to create similar projects.

A penny stock with risks and my verdict

Despite my bullish stance on the market as a whole, and Powerhouse’s current projects, there could be credible headwinds ahead. There are still construction hurdles to overcome to successfully build projects like Protos.

Macroeconomic headwinds such as rising inflation, rising costs of raw materials, and the supply chain crisis could derail progress. Costs could spiral and there may be delays. This could have a material impact on investor sentiment and returns.

From a risk-to-reward perspective, I would be happy to buy a small number of shares at just 1p per share. My investment strategy has always been to buy and hold for the long term and I would adopt that approach here. If Powerhouse shares fell or did not provide returns, I would not have lost much of my hard-earned cash.

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

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 »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »