Penny stocks with promise! Could one of these little UK tech companies be the next big thing? 

I’m considering the prospects of two lesser-known telecoms penny stocks that are undervalued and have lots of growth potential.

| 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.

Smiling senior white man talking through telephone while using laptop at desk.

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.

Penny stocks aren’t for everyone. They’re usually low-revenue companies with very small market-caps. So the price is more prone to volatility, making them a high-risk, high-reward investment. But it can pay off to take a bit of a risk now and then.

Even Amazon was a penny stock at one point!

Today, I’ve identified two undervalued micro-cap shares I feel are worth considering. Could they be the next big thing?

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

Let’s have a look.

BATM Advanced Communications

BATM Advanced Communications (LSE: BVC) is a relatively small business that develops cybersecurity, diagnostics and networking products for healthcare, government and military agencies. It’s a fairly simple business but one I believe has growth potential. 

From military applications to laboratories and agriculture, there’s high demand for its products in today’s digitised world.

The company enjoyed a huge boost during Covid by developing home testing kits in partnership with Israeli diagnostics firm Novamed. But sales soon tapered off rapidly, wiping 85% off the share price since an all-time high of 140p.

Created with Highcharts 11.4.3Batm Advanced Communications PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

It’s now unprofitable but has a good price-to-book (P/B) ratio of 1, lower than the UK telecoms industry average of 1.9. It holds a fairly decent amount of cash and $116m in equity with only $5m of debt, so its balance sheet looks good.

During 2023, revenue increased from $116m to $122m and is expected to grow to $143m by the end of this year. If it does, the company should become profitable within the next six months. I expect that would give the share price a boost.

However, with headquarters in Israel, the company faces operational risks. Conflict in the region could lead to supply and demand issues or limited financing options. That’s something worth keeping an eye on.

Still, I think it’s promising. Should a resolution to the conflict be found, it’s positioned well for growth.

Calnex Solutions

Calnex (LSE: CLX) designs instruments for testing telecom networks and data centres around the world. Some of its customers include Apple, Samsung, Huawei and AT&T.

Earlier this year, it ended a 12-year sales partnership with Spirent which accounted for much of its revenue. The decision came after Spirent accepted a £1.2bn takeover deal from US firm Keysight Technologies, which makes similar products to Calnex. The share price crashed heavily on the news but has recovered 18% since this year’s low.

In June, the company participated in a successful demonstration of a new low-cost 5G mobile capability called xHaul. The technology has several potential use cases in the development of next-generation mobile networks like 6G.

Calnex is only barely profitable, bringing in a meagre £40k worth of earnings the past year. Revenue and income both fell considerably in its latest earnings report. Still, it has no debt and is in a stable financial position. It also has a decent P/B ratio of 1.7, just below the industry average.

With new sales partners picking up its products, the company has decent growth prospects. It’s undervalued by 52% based on future cash flow estimates and earnings are forecast to grow 72% a year.

It might need some time to become the ‘next big thing’ but I like where it’s headed.

Should you invest £1,000 in Gsk right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Gsk made the list?

See the 6 stocks

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and Apple. 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

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »

Investing Articles

What’s happening to the Rolls-Royce share price now?

The Rolls-Royce share price has taken a knock from US trade tariffs, but it's still gained more than 50% in…

Read more »

Investing Articles

10 UK shares that are 50% or more off their 52-week highs

These UK shares have been hit hard. And Edward Sheldon believes there could be some opportunities for those with a…

Read more »

Man smiling and working on laptop
Investing Articles

Could IAG’s share price surge over the next year? These analysts think so!

IAG's share price has sunk, reflecting growing concerns over the impact of trade wars on airline profits. Is this a…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£10,000 invested in Apple shares last week is now worth…

Apple shares are down 18% over the past week. It’s a truly phenomenal downward movement, but investors may want to…

Read more »

Investing Articles

Are shares like Tesco a safe haven for investors?

Christopher Ruane sees a lot to like about Tesco shares. But does he see them as a safe heaven in…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

The 2025 stock market sell-off could be a once-in-a-decade opportunity to build wealth in an ISA

If a long-term investor has cash sitting in an investment ISA, now could be a good time to put some…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Is now a good time to start buying shares?

Stock market turbulence can be alarming, but it can also offer opportunity. Our writer considers whether now could be the…

Read more »