Up 77%! 1 red-hot penny stock I’d buy in June

Shares of Billington Holdings (LSE: BILN) have been on fire over the last few months. Here’s why I don’t think it’s too late to buy this surging penny stock.

| 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.

Illustration of flames over a black background

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.

Billington Holdings (LSE: BILN) is a penny stock I sure wish I’d bought one year ago. Or six months ago for that matter. It’s up 71% and 77% in those respective time frames!

Over five years, the share price is ‘only’ up 43.5%, as there was a setback during the pandemic. But barring a cancellation in 2019, there have also been cash dividends along the way. So this has largely been a very solid investment in recent times.

Bu what about the future? Well, I think there could further gains ahead. Here’s why.

Made of steel

Founded 76 years ago, Barnsley-based Billington is today one of the UK’s leading structural steel and construction solutions specialists.

The £51m-capitalised group turns raw steel into finished products, from simple structures to the most complex, which are then used by top contractors across the UK. Specialist lines of business include protective coatings, hoardings, safety barriers, and steel staircases.

Understandably, Covid impacted the company’s revenue and profits. There were project delays and supply chain issues, as well as cost pressures exacerbated by the conflict in Ukraine.

But the company has deftly navigated these issues, as seen in its FY22 results (year ending 31 December). Revenue rose 4.7% year on year to £86.6m, while profits soared more than fourfold from £1.3m to £5.8m. And its operating margin climbed to 6.8%, which is higher than previous years.

This flowed through to a fivefold increase in the dividend, which was raised from 3p to 15.5p. It was the highest declared dividend in the company’s history.

Management said: “We anticipate a further improvement in performance during 2023. Beyond the current year the market is more unpredictable. However, Billington has emerged from the pandemic as a stronger and more efficient business, which continues to be supported by a healthy balance sheet“.

Bright future

CEO Mark Smith is targeting more complex projects such as large warehouses, data centres, and stadiums. It’s also supplying steel to the booming UK film and TV studios industry.

According to consultancy firm Knight Frank, this sector will need an additional 6m square feet of production space by 2026 to meet rising demand from the likes of Netflix and Amazon.

As a result, the company has a strong order book for 2023, and is seeing opportunities in high-growth areas like renewable energy infrastructure and ‘gigafactories’ for electric vehicle batteries.

Of course, steel prices can be volatile, potentially impacting the firm’s profits, though the company does stockpile if necessary and employs various price hedging strategies.

And despite the cloudy economic forecast for the UK economy, brokers still expect a 30% increase in sales this year. Plus, they see profits soaring to between £7m and £8m. As for the dividend, there’s a massive hike to 20p penciled in.

Good value

The stock has a forward-looking price-to-earnings (P/E) ratio of eight, which screams value to me. It also carries a forward dividend yield of 4.9%, with the potential payout well covered 2.5 times by earnings.

Overall then, this is a well-run business supplying many high-growth sectors of the UK economy. The shares look cheap and the dividend promises a decent income stream.

If I had cash to invest this month, I’d buy Billington shares.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Netflix. The Motley Fool UK has recommended Amazon.com. 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 »