I’ve watched a number of penny shares throughout 2022, and I’ve seen plenty that I think are undervalued. Today I’m revisiting three that have fallen further, for no obvious reason. It’s surely due, at least in part, to the current economic uncertainty. But it does make me think I might be looking at better buys now.
Structural steel
First up is structural steel maker Severfield (LSE:SFR). Severfield’s share price is now down 25% over the past 12 months, at 53p as I write. But in recent weeks, we’ve seen a slight uptick from a recent low of 46.7p.
Any recession is not going to help the construction industry. But I see Severfield as having a defensive advantage for when things pick up. Structural steel is at the core of just about all major construction projects, and that has to be an investing attraction.
The biggest risk I see is that an economic turnaround might be some way ahead, and we might see more share price weakness.
But in the meantime, we’re looking at a forecast dividend yield of 6%. Cover by earnings should be reasonably strong.
Lithium
Shares in Atlantic Lithium (LSE: ALL) climbed in the early months of the year. But from a 68p peak in April, the price has been on a slide. At the moment it’s looking relatively stable at 34p.
Atlantic Lithium shares are still up 70% over the past 12 months, and it’s on the back of electric vehicle (EV) technology. Lithium is the stuff that batteries are made of, and the industry can’t get enough of it.
In the current worldwide economic turmoil, EV maker shares have tumbled. Tesla is down 23% over the past 12 months, and NIO has crashed by 70%. No wonder the appetite for lithium stocks has soured.
The biggest risk, I think, is the lack of profit. It’ll be a few years yet before shareholders see any, and there has to be a risk of dilution from any new cash raises. But Atlantic has some very promising assets. And the EV sector will surely pick up again.
Health
Shares in healthcare services firm Totally (LSE:TLY) are down 15% in the past 12 months, at 29p. But it’s another that started the year well and has fallen quite heavily in recent months. Since July, Totally shares have lost 40%.
Some of the fall is probably justified, as Totally had been on a lofty price-to-earnings (P/E) multiple. It’s admittedly hard to value a company when it turns from loss to profit, as it did in 2020-21. But today, a forecast P/E of 13 does not look stretching.
In fact, it looks very attractive when we see forecasts bringing it down to under eight next year. Analysts predict a dividend yield of 3.6% this year, and rising.
How referrals from the NHS might hold up if hospital admissions are dominated by Covid and influenza this winter is very uncertain, and that has to be a risk.
