3 cheap penny shares to buy before it’s too late?

Quite a few penny shares seem to be picking up in 2023. So is confidence returning to the small-cap growth market this year?

| 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.

Aren’t all penny shares cheap? Well, a low price might not mean value. A penny share can still lose the same amount as one priced in pounds, and that’s 100%.

But these three, I think, look like good value. And they might not stay that way for too long.

Property slump

When we think property slump, we think housebuilders. Or we maybe think estate agents, or REITs. But I also think about the humble brick, and that brings to mind Ibstock and Michelmersh Brick Holdings (LSE: MBH).

Michelmersh shares are under the £1 mark, but only just, and it’s the first of my penny share picks.

The price has gained a bit in 2023, and it might not be a penny stock for long. But that comes after a fall from a 2021 peak, and over five years it’s pretty much flat.

So are the shares really cheap? Well, the company seems to think so. It’s been on a share buyback since March. And that alone might be enough to push the price above 100p.

Results for 2022 showed a 15% rise in revenue. Adjusted profit before tax gained 17.5%, with earnings per share up 13.7%.

A long housing slump might hit demand in the next year or so. But it hasn’t caused much harm yet.

Lithium demand

The demand for lithium pushed a lot of stocks up in 2021. Most fell back, but I see Zinnwald Lithium (LSE: ZNWD) shares are taking off again in 2023.

They’re still down 20% in five years, at 13p, at the time of writing. It makes me think this might still be a good time to buy.

This carries the most risk of my three picks. And I’d say it might only be for those who like a bit of growth share thrill from time to time.

There’s no profit here yet, so that makes valuation tricky.

The key question is how much cash it might need before we see the first profit. We have just had a fundraising, so things seem liquid for now.

What draws me most to Zinnwald is it’s the kind of stock I think I’d have bought back when I was young and less risk-averse.

Equipment rental

HSS Hire (LSE: HSS) shares are down 40% in five years. But they started to pick up in April, so are we in for a bull run?

FY22 results just posted show gains across the board, with revenue up 10.7%.

That led to adjusted earnings per share (EPS) of 2.41p, more than double 2021’s figure. On a share price of 13.5p, as I write, that’s a price-to-earnings (P/E) ratio of just 5.6.

The 0.54p dividend for the year means a 4% yield, and that looks strong. Analysts expect more growth in the next few years too.

On the face of it, HSS looks good. But it’s in a tough market right now, and and we can’t yet tell how the firm’s turnaround will go in the next few years. On what I see though, it looks cheap.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Ibstock Plc. 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

Penny stocks to consider buying while their prices are this cheap

Some of the penny stocks I've been watching have already climbed above the 100p level. But I see potential in…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Revealed! One of the hottest growth, value, and dividend shares to buy today

This high-dividend, low-cost company is also one of the London stock market's most exciting growth shares, writes Royston Wild.

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d target a £2,219 monthly passive income with FTSE 100 shares

Investing in FTSE 100 shares can be a great way to turn a regular investment into a life-changing passive income…

Read more »

Investing Articles

These are the most popular 2024 Stocks and Shares ISA picks so far

After a few tough years, it looks like the 2024 Stocks and Shares ISA season is getting off to a…

Read more »

Investing Articles

This FTSE 100 ETF may be the simplest way to become a stock market millionaire

Ben McPoland considers one very straightforward stock market investing strategy that could lead to a million-pound portfolio.

Read more »

Investing Articles

I’d buy 11,220 Legal & General shares for £200 a month in passive income

Our writer considers how much money investors would have to put into Legal & General (LON:LGEN) shares to target £2,400…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

These 2 magnificent FTSE 250 shares are on sale right now!

These FTSE 250 companies still look cheap, despite recent share price gains. Here's why our writer Royston Wild thinks they’re…

Read more »

Blue NIO sports car in Oslo showroom
Growth Shares

Down 36% in 2024, how low could NIO shares go?

The electric vehicle sector has seen some tremendous volatility in recent years, but what does the future hold for NIO…

Read more »