British investors are piling into Lloyds shares at the moment and it’s easy to see why. Right now, the backdrop for the banks is supportive, and the shares are in a strong uptrend. Taking a medium-term view, however, City analysts see more potential in other UK stocks. Here’s a look at a penny stock that analysts believe will significantly outperform Lloyds over the next year or so.
A small UK tech company
The penny stock in focus today is Made Tech (LSE:MTEC). It’s a British technology company that helps government organisations and regulated industries with digital transformation.
Listed on the UK’s Alternative Investment Market, it currently trades for 34.5p. At that share price, its market cap is a little over £50m.
Analysts like it
Now, City analysts seem to believe that this stock can rise significantly in the medium term. Currently, the average price target from the three brokers covering it is 46.50p.
That translates to potential gains of about 35% from here. For reference, the average price target for Lloyds shares is only about 13% above its current share price.
Strong growth and great financials
Taking a closer look at this company, I can see why City analysts like it.
For starters, demand for its services is likely to be high in the years ahead. The UK government is desperate to get up to speed digitally and this company can potentially help. It specialises in helping organisations modernise legacy technology and working practices, accelerate digital services, and drive better decisions through data and artificial intelligence (AI).
Secondly, recent updates have been strong. In late June, Made Tech told investors that it was expecting revenue growth of 20% for the financial year ended 31 May 2025. It also advised that trading for the current financial year would be ahead of expectations at the time.
Third, the financials look great. Over the last five financial years, revenue has climbed from £5.5m to £46m – a really impressive level of growth. Meanwhile, the company is now profitable and the balance sheet is strong with around £10m cash and no debt (as of 31 May).
With a strong balance sheet, significant cash position, tight cost control measures, and future revenue underpinned by a strong contracted backlog, we believe Made Tech is well placed to continue driving organic growth.
Made Tech CEO Rory MacDonald
Finally, the valuation seems reasonable. Currently, the price-to-earnings (P/E) ratio is about 24, which isn’t high relative to the growth being generated.
Worth a look?
Of course, analysts’ forecasts always need to be taken with a grain of salt. There’s no guarantee that this stock will get to 46.5p.
One scenario that could derail the investment thesis is a drop in IT spending from the UK government. This could lead to less revenue growth and a lower valuation for this company.
I like the look of this penny stock, though. In my view, it’s worth considering today.
