The Motley Fool

2 British penny stocks to buy

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.

Young casual man and girl using laptop while looking at invoice and plan the budget to save.
Image source: Getty Images

I’ve recently been looking for British penny stocks to buy for my portfolio to capitalise on the country’s economic recovery during the next few years. Here are two I’d snap up today. 

Top penny stocks 

The first company on my list is the home collected credit lender Morses Club (LSE: MCL). The business provides small loans of between £200 to £1,500 with interest rates of up to 498.34%

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Due to the ethical considerations of short-term, high-interest loans, some investors might not be interested in this enterprise. I fully understand this point of view. The sector has also faced significant regulatory headwinds in recent years, which have forced some of Morses Club’s peers out of business. 

These risks aside, I’d buy the company for my portfolio of penny stocks considering its growth potential. According to its latest trading update, customer numbers at its digital division for both short- and long-term lending products increased to 40% in the three months ended 31 May. The total loan book balance increased 99%. 

Based on these numbers, it seems to me Morses Club is on track to report a solid financial performance in its current financial year. This is why I’d buy the company for my portfolio of penny stocks despite the regulatory and ethical issues outlined above. It seems there remains a demand for these products, which the business is more than happy to meet.

Consumers also appear to rate Morses Club quite highly, with an average rating of 4.5 stars on Trustpilot.

Recovery play

The other company I’d buy for my portfolio of penny stocks is the waste-to-product group Renewi (LSE: RWI). This is a recovery investment, having reported losses in five out of the past six years.

It produced a small net profit of €11m for its 2021 financial year, although between 2016 and 2020, losses exceeded €300m. Unsurprisingly, group net debt has doubled during this period. There’s a risk that Renewi will never exit this cycle of losses and rising debt. 

However, analysts reckon it will continue to earn a profit for the next two years. Current forecasts suggest net earnings will hit €58m by fiscal 2023. 

These are just forecasts at this stage, and there’s no guarantee the company will hit the targets. Nevertheless, I’d add the shares to my portfolio of penny stocks, considering the firm’s recovery potential. 

If Renewi can hit City growth targets, the stock looks cheap. It’s currently trading at a 2023 forecast P/E of just 9. 

And even if the company struggles in the next few years, I am optimistic about its potential. The world is trying to move away from the throwaway culture, which means waste-to-product facilities could become more sought-after. This could work in Renewi’s favour. However, if the group fails to make the most of its facilities, a competitor with deeper pockets may step in and take over the enterprise. 

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.