Investing in penny stocks can be a wild ride at times. Share price volatility is common, while these smaller companies can look especially vulnerable during downturns.
But the rewards of snapping up these small-cap shares can also be life-changing. Just ask those investors who bought shares in Apple, Monster Beverages, and Amazon.
Here at The Motley Fool, we believe a company must meet two criteria to be considered a penny stock. It must trade below £1, but it must also have a sub-£100 market cap.
Here are two top UK shares I don’t think will be penny stocks for much longer.
Metals Exploration
Share price: 4.1p; market cap: £86m
Purchasing junior mining stocks can be a high-risk strategy. Problems at the exploration and mine development stages can be commonplace. And smaller operators like this rarely have the financial strength to weather such problems, or at least without significant intervention like tapping shareholders for cash.
But I believe gold miner Metals Exploration (LSE:MTL) may be worth the risk. This AIM share owns the Runruno yellow metal project in the Philippines. And it is on a roll right now: it recorded record annual revenues and gold sales in 2023.
It has also been adding exploration licences in the country’s Cordillera region to drive future growth. The company has described the territory as a “prolific gold belt” that has produced 40m ounces of the precious metal over the years.
Now could be a brilliant time to buy the mining stock, too. Gold prices recently hit record peaks just shy of $2,200 per ounce in recent sessions. The challenging macroeconomic and geopolitical backcloth means demand for the safe-haven metal could keep charging higher.
Finally, I’m encouraged by the huge reduction in Metal Exploration’s debt over the past year. This fell 35% year on year to $19.9m as of December.
DP Poland
Share price: 11.5p; market cap: £80.2m
Competition in the food delivery industry is famously fierce. On top of this, rising labour and ingredient costs pose a threat to operators’ margins.
But I believe DP Poland (LSE:DPP) is still a sound investment today. Demand for fast food is soaring in its home country along with fellow emerging market, Croatia. This is likely to remain the case for years to come as rising personal income levels drive market penetration from current low levels.
Latest financials in January illustrate the company’s terrific earnings potential. Like-for-like sales in Poland soared 19.7% during 2023 in its core Polish market. Corresponding revenues in its fledgling Croatian market, meanwhile, increased by 16.4%.
To illustrate the company’s improving momentum, like-for-like Polish sales rose 27.5% in the final quarter. This was the greatest quarter of sales in DP Poland’s history.
The AIM firm is expanding to capitalise on this fertile marketplace, too. It had 116 stores on its books as of December. Moves to drum up business by raising advertising spending have also proved highly successful.
