This penny stock has almost doubled revenue in 2 years! I think there’s more to come

Jon Smith flags up a penny stock that he thinks might not remain in that category for much longer, thanks to strong revenue growth recently.

| 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.

Abstract bull climbing indicators on stock chart

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.

A penny stock is one that has a market cap below £100m and a share price of less than £1. Within the UK stock market, there are plenty of firms that fit this description. It takes time to sift through potential options to try and find the next small company that could have high growth potential. But here’s one that I think I’ve spotted.

And the candidate is…

Marks Electrical Group (LSE:MRK) has been in business for over 35 years. Yet it only went public in late 2021, so it’s still a relatively new stock for investors to consider.

It operates a relatively simple business model of selling electrical goods and appliances online. Over the past year the share price has jumped by 25% thanks to better than expected financial results.

For example, the 2023 results showed a 21.5% increase in revenue. This comes on the back of a 44% jump in the 2022 full-year number. It means that the 2023 figure is 75% higher than revenue from two years ago. Clearly, the business is enjoying a strong period of growth.

Reasons for the growth

There are several factors that are helping to drive Marks forward. The team reacted to the cost-of-living crisis and introduced flexible credit solutions and packages for purchases. This has helped to boost revenue. Of course, credit needs to be managed carefully, to avoid default risk further down the line.

Another smart move has been expanding into different product categories with a much broader item range. Given the online shop can allow for an extensive range without having to stock all the goods at once, this makes sense. As a result, Marks can capture a larger client base due to offering more products.

It might only sound like a small point, but the central location in Leicester it another big plus. It allows the firm to send out a lot of products on a same-day delivery basis. It offers free delivery for large ticket items. As we all know, speed of service is something that consumers have become accustomed to.

Optimistic going forward

As mentioned in a company report, Marks “still only [has a] 1.6% market share of the £5.4bn UK MDA market”. This highlights the scope for further growth and higher profits in years to come.

Granted, competition in this space is intense. The firm has done well to try and find ways to differentiate itself, as this sector can very often simply boil down to which retailer is the cheapest. But it’ll have to continue to think outside of the box to stay ahead of much larger competitors. The business also has pressure from rising costs, which can quickly eat into profit margins.

Despite these risks, I believe the stock can rally in coming years as I expect revenue growth to continue. Even if it can gain just another 0.1% market share, it probably won’t be a penny stock for too long. On that basis, I think investors should consider buying the stock.

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.

Jon Smith 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 Growth Shares

Investing Articles

3 cheap stocks to consider buying for the AI revolution

Investors looking for AI stocks to buy might be worried about high valuations amid current market euphoria, but these three…

Read more »

Investing Articles

The FTSE 250 is brimming with potential, especially in stocks like this one

The main Footsie index gets all the attention but its little brother, the FTSE 250, is full of growth potential.…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Spirax share price has gone nowhere in five years! Time to buy?

The Spirax share price stands almost exactly where it did five years ago. Our writer asks why? And, more importantly,…

Read more »

Investing Articles

Up 167% in 2024! Is this growth stock showing any signs of slowing?

With artificial intelligence (AI) changing the world in the last few years, growth stock Nvidia has enjoyed an incredible run.…

Read more »

Growth Shares

Down 88% in 3 years, I think the boohoo share price is ready for a comeback

Jon Smith flags up why some of the problems facing the boohoo share price should fade in the coming year…

Read more »

Abstract bull climbing indicators on stock chart
Investing Articles

Up 77% since October, is there any value left in Barclays’ share price?

The Barclays share price has rocketed after the announcement of its new vision last year, but the shares still seem…

Read more »

Growth Shares

Prediction: these shares will outperform Rolls-Royce over the next 5 years

Rolls-Royce shares could deliver solid returns in the years ahead. However, Edward Sheldon believes these stocks will produce higher gains.

Read more »

Investing Articles

After a trading update, does the Experian share price look good value for money?

The Experian share price pulled back after its trading update on 16 July. Our writer questions whether the company looks…

Read more »