A 6p penny stock that’s worth a closer look right now

This penny stock has started to rise recently. Yet with revenues projected to double in the next few years, there could be more gains to come.

| 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.

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'

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.

Investing in penny stocks is a high-risk, high-reward game. On the downside, these stocks can be very volatile. On the plus side, however, they can potentially make investors a fortune.

Here, I’m going to highlight a 6p penny stock that appears to have a lot of potential. I think it’s worth a closer look right now.

Life-saving technology

The stock I’m going to zoom in on today is Seeing Machines (LSE: SEE).

It’s an AIM-listed company that specialises in technology that helps machines (cars, planes, trucks, buses, mining equipment, etc.) see, understand, and assist human operators.

The goal of its technology – which monitors drivers’ faces and eye movements – is to reduce human fatalities to zero and make the world a safer place.

Founded in 2000, the company is headquartered in Australia. However, it operates globally, and generates a lot of its revenues in North America.

Its customers include GM, CAT, Emirates, Qantas, Transport for London, and Magna International (a large Canadian parts manufacturer for automakers). This distinguished list of customers suggests that the company has some decent technology.

At present, its market cap is around £240m.

Source: Seeing Machines, YouTube

Strong growth ahead

Seeing Machines’ most recent results were strong.

For the year ended 30 June 2023, revenue was up 48% to $57.8m (ahead of market expectations) with annual recurring revenue increasing by 27% to $13.6m.

Meanwhile, gross profit was up 65% to $28.9m.

What caught my eye, however, was the medium-term outlook.

Looking ahead, the company said that by FY26 (the year ending 30 June 2026), it expects revenue to be not less than $125m.

In other words, it reckons it can more than double its top line in the next three years.

That’s pretty exciting.

It’s worth noting that the company believes that new European safety regulations will provide a tailwind going forward.

Our three business units are now well established, and we are expecting to see continued growth from each of them as we move closer to compliance deadlines in Europe, where every vehicle on European roads will require technology to mitigate risks associated with fatigue and distraction,” commented CEO Paul McGlone.

High risk, high reward

Now, this is a high-risk stock.

Currently, the company is not profitable.

For the year ended 30 June, it generated a loss of about $15.5m.

Companies that are not profitable are harder to value accurately. As a result, they tend to have volatile share prices.

Adding risk is the fact that the company has a relatively large amount of borrowings ($40m at 30 June) on its balance sheet.

Of course, another risk is that in a decade’s time, cars, buses, trucks, and planes may be driving themselves. So, the company’s technology could become obsolete.

All things considered, however, I think the stock looks interesting.

It’s not a penny stock I’d load up on. But I’m tempted to take a small position.

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.

Edward Sheldon has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 Small-Cap Shares

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

Will this penny stock be the next Nvidia?!

Nvidia shares have exploded 29 times in value since 2019, but can this semiconductor penny stock do the same? Zaven…

Read more »

Investing Articles

This cheap penny stock could skyrocket in the electric vehicle revolution!

Zaven Boyrazian explores a UK penny stock that’s been on a downward trajectory, despite the critical role it could play…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

1 penny stock I reckon has legitimate potential to soar

Despite a turbulent time recently, Sumayya Mansoor explains why she believes this under-the-radar penny stock could be a diamond in…

Read more »

Investing Articles

Is Powerhouse Energy the best penny stock to buy today?

The Powerhouse Energy share price has skyrocketed by triple digits over the last year! Does that make it one of…

Read more »

Close-up of British bank notes
Investing Articles

2 penny shares to consider buying while their prices are still cheap

I thought these two penny shares looked good value in late 2023. Their prices have gained since then, but I…

Read more »

Investing Articles

1 small-cap stock with a 3.1% yield to consider for a Stocks and Shares ISA

Our writer highlights an interesting little British stock that might well warrant a place in his Stocks and Shares ISA…

Read more »

Investing Articles

Should I follow the chief executive into these UK shares right now?

This UK company director just bought shares in the business he manages – is the timing right and should I…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Up more than 15%! — this small-cap company is delivering phenomenal dividend growth

There’s more good news in this company’s interim report and it may be shaping up as a decent dividend growth…

Read more »