Michelmersh Brick Holdings (LSE:MBH) is one of my top penny stock candidates. And its share price has been falling recently, so is it better value now? I think it might be.
A December trading update told us “there has been a notable slowdown in the construction market.” It was, the company said, all about “a challenging macro-economic outlook and the uncertainty of UK Budget policy announcements, which have adversely impacted both consumer sentiment and investment decision making across the sector.”
The Michelmersh share price is down 15% since the start of 2026, after suffering further in the weeks since the Iran war kicked off. The conflict means an almost certain rise in inflation, and little chance of Bank of England interest rate cuts any time soon. And that seems very likely to cause knock-on pressure on the housebuilding industry.
But I see that as short term, and selling the shares as short sighted.
Builder downturn
I’ve included Taylor Wimpey in the above share price chart, to show how closely the brickmaker’s share price is tied to housing. And to me, that says something very positive. Housebuilding must surely pick up. And when it does, I expect the outlook to turn brighter for Michelmersh too.
Michelmersh is a very small company though, with a market cap of just £65m. And that means it could face serious dangers if its business is disrupted — maybe even if it’s only for a short time. Any financial squeeze could prove painful.
Still, with that latest update, the company said it expects adjusted EBITDA of approximately £12.5m for the full year — with results due 24 March. And there was “a broadly cash neutral balance sheet” at the end of December. The cash situation will deserve close attention, but it’s not too scary.
Even with the risks brought by the latest macroeconomic events, I think this is a penny stock well worth considering for a medium-term recovery.
Forecasts
Looking at broker forecasts, we see an average price target of 135p on the stock. That’s 93% ahead of the price at the time of writing. And the top-of-the-range target of 150p suggests a gain of more than 110%.
Now, these targets haven’t been updated to reflect the last few weeks of turmoil in the Middle East. And it might be some time before we get much of a feel for how the industry could be affected.
But as they stand, forecasts show strong earnings growth between now and 2027. And if they come good, it could mean a price-to-earnings (P/E) ratio of only around eight by then.
What next?
I ask myself… what’s the worst that’s likely to happen? And my gut feel is that we might see the building sector recovery set back by maybe about a year — though that’s an educated guess at best. So would I be happy to wait until 2028 for that predicted low valuation?
For sure, yes. And — even with the clear penny stock risk — that’s why I have Michelmersh on my ISA candidates shortlist.
