One penny stock on my radar currently is Gaming Realms (LSE: GMR). Here’s why.
Online gaming and gambling
Gaming Realms is an online gaming business. It creates, licences, and distributes entertainment software. Furthermore, it works alongside some of the bigger players in the industry and creates games on their behalf as well as its own platforms.
It is worth remembering that a penny stock is one that trades for less than £1. So what’s happening with Gaming Realms shares currently? As I write, they’re trading for 31p. At this time last year, they were trading for 24p, which is a 29% increase over a 12-month period.
To buy or not to buy?
Let’s start with the bull case then. To start with, the gaming and online gambling market is a mammoth one and is only growing. This is good news for Gaming Realms. I’m buoyed by the fact it possesses strategic partnerships with some established firms in the space, namely Entain, DraftKings, and 888 Holdings. These agreements can only bolster Gaming’s performance and boost its shares and potential investor returns.
In addition to this, Gaming Realms owns the intellectual property to Slingo. Slingo is an extremely popular and lucrative game, over 30 years old, which combines slots and bingo. It has risen in popularity and Gaming has added 12 additional games in 2022 to the original series, bringing the total to 65 as I write.
Next, Gaming Realms has a decent track record of performance growth in recent years. It has grown revenue for the past four years in a row and profit for the past two years. In its most recent results for 2022, pre-tax profits jumped over 200%. However, I am conscious that past performance is not a guarantee of the future, especially when it comes to a penny stock as they are prone to more volatility.
Lastly, Gaming Realm’s growth aspirations seem to be coming to fruition, especially aggressive expansion in the US market. This is because online gambling and gaming is growing exponentially. This is due to loosening regulation in that territory. I believe this is shown through the recent performance growth mentioned earlier.
On a bearish note, tightening regulation is a looming spectre for Gaming Realms, especially in the US. This regulation can change at any time and could prohibit its growth prospects, in turn, impacting performance and potential investor returns.
Finally, there are moral considerations to take into account when looking at gaming and gambling firms like Gaming Realms. Some people take issue with investing in firms that derive income from gambling. This could impact investor sentiment, and even performance.
A penny stock I’d buy
I’ve decided I would be willing to buy a small number of Gaming Realms shares when I have the spare cash to do so.
I view Gaming Realms as a low-risk, high-reward prospect. At 31p per share, I won’t be investing hundreds so my exposure is limited. I do believe it is in a perfect position to provide me with decent long-term returns. This will be through its strategic agreements, gaming portfolio, especially its lucrative Slingo series, and growth plans.
