City experts think these penny stocks could rise by at least 80%

These penny stocks could be too cheap to ignore, according to analysts. Our writer wonder whether he should add them to his portfolio.

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Two of the penny stocks on my watch list right now are trading significantly below City brokers’ price targets.

Should I consider buying either of these shares today? Let’s take a look.

OMG: a bargain buy?

Tech group Oxford Metrics (LSE: OMG) currently has a market cap of £77m and a share price of about 60p.

Should you invest £1,000 in Lloyds Banking Group 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 Lloyds Banking Group made the list?

See the 6 stocks

However, the group also has net cash of about £45m. This bumper cash pile is the result of the sale of the group’s Yotta business for £52m in 2022.

What this means for shareholders is that the remaining Vicon business is effectively being valued at around £32m. The remainder of the market cap is covered by net cash.

Vicon makes motion capture systems used in television and video game production. It looks a decent business to me.

Created with Highcharts 11.4.3Oxford Metrics Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Broker forecasts show Oxford Metrics’ earnings rising by 36% to 2.9p for the 24/25 financial year. That puts the stock on a forward price-to-earnings (P/E) multiple of 20.

However, if I strip out the group’s net cash, this multiple drops to just 8.3.

In addition to this, the shares also offer a useful 5% dividend yield.

For me, the risk is that management will spend the company’s cash badly. They may pay too much for acquisitions. Or they may buy businesses that subsequently fail to perform.

I reckon these risks help to explain why Oxford Metric’s current 60p share price is a long way below City brokers’ average price target of 147p.

Even so, I’m interested. I plan to do some further research on this business.

Turnaround time

Last year’s Hollywood strikes may have seemed a long way from the UK. But the disruption they caused had a significant impact on UK companies involved in television production.

One such business is Facilities by ADF (LSE: ADF), which provides mobile production facilities to the UK film and TV industry.

This AIM-listed small-cap floated in January 2022. It currently has a market cap of £55m and a share price of 51p.

When I looked at ADF after its IPO, I was impressed. The company was generating double-digit profit margins and strong rates of growth.

Unfortunately, things have gone off track. ADF’s recent half-year results revealed a 30% drop in revenue during the first half of 2024, compared to the same period last year.

Created with Highcharts 11.4.3Facilities By Adf Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Another concern for me is ADF’s decision to expand through acquisitions. A recent deal for a portable roadway business looks fine in itself, but it will cost up to £21m. That’s nearly half the current market cap.

The good news is ADF’s core markets seem to be returning to normal:

Trading at the end of H1-FY24 finished strongly, with the order book for the second half of the year building well across the summer months as momentum returns across the market following the Strikes.

– Facilities by ADF

At around 51p, ADF is trading on a 2024 forecast P/E of nine, falling to a P/E of just five for 2025. Brokers have an average price target of 93p on the stock.

I certainly think the shares could be worth more if the business can return to growth. However, it’s a recent listing and has just made a big acquisition. I’m going to stay on the sidelines for a little longer yet.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Lloyds Banking Group 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 Lloyds Banking Group 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.

Roland Head 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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