Investing in penny stocks is a risky endeavour that not all investors are comfortable pursuing. After all, the vast majority of these tiny enterprises are small for a good reason. But every once in a while, it’s possible to uncover a diamond in the rough. And investing early into these businesses can deliver explosive gains in the long run.
That might very well be the case for Oxford Metrics (LSE:OMG). The fledgling technology business specialises in motion intelligence used within a variety of industries. That includes motion capture systems in the entertainment sector, as well as machine vision for industrial manufacturing and automation. And it’s already being used by some of the biggest businesses in the world, including Johnson & Johnson, Ubisoft, Boeing, Airbus, and even NASA.
So how much money could investors potentially make with just a £100 investment today?
Analyst projections
Demand for machine vision solutions has been steadily rising, particularly within the manufacturing sector. This comes as a result of increased AI-powered quality control investments and the general digitalisation of factories in the pursuit of efficiency and fewer production errors.
That’s a key tailwind Oxford Metrics’ management team intends to capitalise on with its recent expansion into the sector. And according to analysts, this could prove to be an explosive catalyst that may significantly accelerate revenue growth in 2025 and beyond.
With that in mind, it’s not so surprising to see some lofty share price forecasts for this penny stock. Canaccord Genuity currently has a 100p share price target, while Numis Securities has set its forecast at 140p.
Compared to where the shares currently trade, that suggests a potential 70-140% potential gain, transforming a £100 investment into anywhere between £170 and £240 over the next 12 months. In other words, Oxford Metrics might not be a penny stock for much longer. And if it can continue to expand its market share and top line, a 140% potential gain could be just the tip of the iceberg.
What could go wrong?
Despite having promising technology and future growth potential, like most penny stocks Oxford Metrics has several risks investors must consider.
Currently, over a third of its revenues stem from the notoriously cyclical entertainment sector. Expanding into manufacturing will help address this sector’s concentration risk. However, penetrating a new market’s going to be a challenge and certainly won’t happen overnight.
There’s also the competitive landscape to consider. Despite being a niche technology business, the machine vision market is already flooded with rival firms pursuing the same target customers. That puts a lot of pressure on the firm to continuously innovate and stand out from the crowd with superior technology. If it falls behind, clients may start venturing elsewhere.
The bottom line
As with all penny stocks, Oxford Metrics is a risky investment. But with an established customer base, rising sales, and positive albeit choppy profits, the company’s certainly in a stronger position than most stocks in this segment of the stock market.
That’s why, despite the risks, Oxford Metrics may be worth a closer look for long-term investors.
