A penny stock that could be set to grow and looks like a good option to buy and hold is SRT Marine Systems (LSE: SRT). Here’s why investors should consider buying some shares.
Marine technology
SRT is a technology business that creates and sells advanced maritime domain awareness technology, products, systems, and services. It specialises in automation identification systems (AIS) and already possesses a worldwide footprint, with operations in Europe, the Middle East, North America, and the UK.
It is worth remembering a penny stock is one that trades for less than £1. As I write, SRT shares are trading for 42p. At this time last year, the shares were trading for 31p, which is a 35% increase over a 12-month period.
A penny stock with risks but potential rewards ahead
The rising adoption of AIS systems could boost SRT, in my opinion. To break it down into simple terms, the same way road traffic and air traffic systems work, to ensure flow of traffic, monitor risks, and help with navigation and course, AIS does this underwater. With SRT’s geographic footprint and rise in demand for services, it could see earnings and performance boosted. This is especially the case when you think of how vast seas are, with many ports, borders, and coast guard authorities to consider.
SRT’s most recent annual report, for the year ended 31 March 2023 was impressive. It recorded a group revenue increase of over 270% compared to the same period last year. Plus, each of its segments experienced growth. Finally, a forward-looking order book of around £160m could help boost growth in the coming years.
From a risk perspective, SRT has posted lots of losses in recent years. This is not uncommon for a penny stock. The losses have been due to lots of capital expenditure. I understand this is usually needed in the tech sector, especially with newer tech. However, at a certain point, it is important the business starts turning a profit for stability, growth aspirations, and providing shareholder returns.
Finally, SRT could find that technology may change and adapt and it may need to invest heavily to move with the times. For example, AIS adoption is increasing rapidly but currently there is only a minuscule number of ships to date that have adopted it. It could take years for the majority of vessels to undertake this adoption, and that’s if newer, better tech hasn’t arrived.
My verdict
Overall I believe there is a lot to like about SRT Marine Systems. As a penny stock, I understand that it is prone to volatility and there could be some turbulence ahead.
However, SRT looks like a great growth stock option. At present, trading for under 50p, the shares don’t look like a huge risk if a small number of shares were considered. There’s a good chance that over the longer term, the business could soar as AIS adoption continues to ramp up.
If I had spare cash to invest right now, I’d buy a small number of SRT shares for my holdings.
