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3 penny stocks to buy

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Coats Group (LSE: COA) is a penny stock I think offers some terrific value right now. City brokers believe earnings at the threads and zip manufacturer will soar 80% in 2021, with the economic recovery and gradual exit from Covid-19 lockdowns boosting broader clothing sales.

This leaves this UK share trading on a forward price-to-earnings growth (PEG) multiple of 0.2. A reading below 1 suggests a stock could be undervalued.

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Naturally, these bright forecasts could be blown off course if coronavirus cases head through the roof again. But I think this threat is baked into the Coats Group share price at recent levels. Demand for so-called fast-fashion is tipped to keep growing strongly. Also, this penny stock’s broad global footprint will allow it to benefit from steady population growth too.

Mining for mega returns

Precious metals miner Serabi Gold (LSE: SRB) is another penny stock I’m considering adding to my own portfolio today. Having exposure to gold is a good idea for investors to protect themselves against unforeseeable events (as the Covid-19 crisis and accompanying stock market crash last year proved). I think this UK share, one which trades on a forward PEG ratio of 0.6, is a good way to go about this.

The City thinks annual earnings will rise 10% in 2021. I’m confident of strong and sustained bottom-line growth too, thanks to Serabi’s impressive record on the exploration and production fronts. And then factor in the bright outlook for gold prices. Indeed, news yesterday that eurozone inflation has hit 10-year highs underlines the favourable environment for precious metal values.

Digging for metals is often problematic. So companies like Serabi can be hit by a double whammy of unexpected large costs and revenues setbacks. Still, at current prices, I think this penny stock remains an attractive stock to buy today.

Another attractive penny stock

Now Sportech (LSE: SPO) doesn’t sport low earnings ratios that makes Serabi such a great buy. In fact, the company isn’t even expected to turn a profit this year. And while it’s expected to move into the black in 2022, this results in a price-to-earnings (P/E) ratio of around 78 times. Bad news flow around the company could therefore send investors sprinting for the exits.

That said, I think this penny stock could still be a great buy today. Sportech operates 14 gaming and sports venues in Connecticut in the US as well as digital betting services. It’s therefore well-placed to ride the booming American sports gambling market.

The company had previously been denied a sports betting licence in Connecticut. But it traversed the problem this month by inking a 10-year partnership agreement with Connecticut Lottery Corporation to provide sports betting across its venues.

I’m tipping this to be an important turning point in the Sportech’s fortunes. It’s now set to ramp up retail betting across the state to latch onto this fast-growing entertainment sector.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Coats Group. 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.

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