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

With many FTSE 100 stocks now overbought, investors may consider digging deeper to uncover penny stocks with room to grow.

| More on:
One English pound placed on a graph to represent an economic down turn

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.

I’ve noticed a few penny stocks lately that have climbed above the 100p level and are no longer cheap. But there’s still a few with decent growth potential, and I think these two are worthy of further research.

UK trade and manufacturing hit a wall in 2018, and small industrial businesses took the brunt of the crash. The combined effects of Covid and Brexit didn’t help and many businesses folded under the weight of the onslaught. But those that survived are now well-positioned to take the lion’s share as the recovering economy brings fresh demand. 

Mincon Group

When looking at small manufacturing firms with growth potential, one promising mining-related stock always pops up.

Mincon Group‘s (LSE: MCON) a little-known rock drilling company based in Ireland, with 604 employees and £93m market-cap. For almost 50 years it’s been manufacturing all kinds of drilling products for miners, excavators and anyone else that wants to make holes in the ground.

It’s a simple, non-technical business that’s probably seen little change in the past five decades. As a result, it’s unlikely to be the next Nvidia — but it’s enjoyed periods of significant growth in the past. In 2018, the share price reached 153p but plunged soon after and has had mixed results since.

Despite equity increasing steadily over the past decade, the share price is at an all-time low. But it’s in a good industry and compared to earnings, its price is ‘cheap’. With a price-to-earnings (P/E) ratio of only 14, it’s well below the industry average. An improving economy could boost sales, bringing it more in line with the rest of the industry.

Sure, profit margins are half what they were last year but earnings are forecast to grow 20% a year going forward. And with minimal debt and a 4% dividend yield, there might still be life in the old girl. I think there’s good potential in the low-priced shares.


Trifast‘s (LSE: TRI) a £97m UK-based company that makes industrial fasteners and category C components — basically, nuts and bolts. Like Mincon, it’s a simple business that’s been around since the 70s with little change to operations. 

Declining income means the company’s recently become unprofitable, with the shares falling 67% in the past five years. But with a low price-to-sales (P/S) ratio of 0.4, it now has lots of room to grow. Last year, it cleared £241m in sales and revenue increased 9.1%, prompting analysts to forecast a 50% price rise in the coming year. And with earnings forecast to grow 103% per annum, things are certainly looking up.

But first, it must climb out of its current hole. Despite paying a dividend of 2p per share, its earnings per share (EPS) is currently running at a loss of 2.8p per share. It’ll need things to improve if it hopes to keep that up. Interim CEO Scott Mac Meekin plans to do just that, “creating an aligned leadership team with the skills and necessary capabilities, visions and drive to maximise 50 more years of success.”

Since the vast majority of industrial manufacturing still requires nuts and bolts, I expect demand will increase as the economy improves. And with revenue and cash flow improving, Trifast may already be on the mend. 

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.

Mark Hartley 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 Investing Articles

Investing Articles

£10k in an ISA? Here’s how I’d aim to generate a ton of passive income

I dream of escaping the shackles of a salary with financial independence and a steady stream of passive income. Here’s…

Read more »

Investing Articles

Are Burberry shares a bargain or a value trap?

Appearances can be misleading in the stock market. Shares that look like a bargain can turn out to be a…

Read more »

Investing Articles

How I’d target £17,673 passive income with just £100 a week

Our Foolish writer explains how he’d build a portfolio capable of generating a life-changing passive income with limited capital.

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

If I’d put £20k into a FTSE All-Share tracker fund 10 years ago, here’s what I’d have now

A lot of UK investors have money in FTSE All-Share tracker funds. Here, Edward Sheldon looks at how these products…

Read more »

Investing Articles

How I’d invest £10k in a SIPP to target £28,000 annual passive income

Investing just £10k today in a SIPP could be the key to a chunky retirement income in the long run.…

Read more »

Investing Articles

How I could earn a second income worth £35,000

Millions of us invest for a second income. Our writer explains how he's making it work and shares tips for…

Read more »

Investing Articles

3 ways Labour could impact the Rolls-Royce share price

Labour have swept to power on a pro-worker, pro-business ticket. But how could the new government influence the Rolls-Royce share…

Read more »

Fans of Warren Buffett taking his photo
Investing Articles

No savings at 35? I’d use Warren Buffett’s method to try and build massive wealth

Warren Buffett made most of his multi-billion-dollar fortune after turning 50. So what was his trick to building enormous wealth…

Read more »