2 very different penny stocks investors should consider buying

Some penny stocks could be diamonds in the rough. Our writer details two picks investors should take a closer look at.

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Revolution Beauty Group (LSE: REVB) and Kodal Minerals (LSE: KOD) are two penny stocks in opposite industries.

Here’s why I reckon investors should be taking a closer look at them.

Beauty and healthcare

Revolution is a beauty and personal care business with multiple brands. It sells direct to consumers via e-commerce as well as in retail outlets. The business has been on a great growth trajectory and went public back in 2021.

Over a 12-month period, the shares are up 20%, from 24p at this time last year to current levels of 29p.

Yesterday’s FY24 update caught my eye, for positive reasons. The business reaffirmed its target of reaching £1bn in sales by 2030. A big part of this is driving efficiencies and improving margin levels, especially with current inflationary pressures.

In its half-year update in November, it said it expected to reach single-digit EBITDA and revenue growth for the full year. It has now increased its EBITDA aim to low double-digit figures, which is promising and shows signs the strategy is already bearing fruit.

Revolution has had issues with accounting and reporting trading late in the past. This resulted in a shift in management with both the CEO and CFO departing last year. A new CEO could bring a fresh impetus to the business.

From a bearish perspective, one of its majority shareholders is fast-fashion firm boohoo. You may recall boohoo skyrocketed in popularity a few years back. However, reputation issues and declining performance sent the shares tumbling after a great run. A growing influence through shareholdings from the beleaguered firm is something I’ll keep an eye on.

According to Statista, the health and beauty market is only set to grow. This is good news for Revolution, its potential, and existing shareholders.

Lithium boom

Lithium stocks have some exciting potential, in my view. This is due to the plethora of real world applications that the commodity offers, including in electric vehicles and renewable energy initiatives. All this could mean lithium is in high demand for years to come.

Kodal possesses a developing mining asset, the Bougouni mine in Mali. If it can successfully mine at this asset, there are potentially 220,000 tonnes of lithium-based spodumene readily available for it to sell each year.

The biggest risk for most commodities firms, and more so smaller ones like Kodal, is operational issues as well as mines not yielding the expected output. Furthermore, geopolitical instability in Africa may present issues for Kodal. Plus, mining isn’t a cheap endeavour, a strong balance sheet is important, and often the reason small-cap firms fail.

However, I’m buoyed by the fact that Kodal has a $100m deal with Chinese giant Hainan to get things going. This could help catapult the project, and the business, to new heights. It’s also a sign of confidence in Kodal and its ambitions, if you ask me.

I reckon there’s some potentially exciting times for Kodal. If it can produce the amount of lithium-based spodumene it has mentioned, performance and its shares could soar.

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.

Sumayya Mansoor 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.

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