Ringing endorsement for this penny stock

As deals go, this is top drawer stuff. Today, Seeing Machines announced a global framework agreement with top-tier oil giant Royal Dutch Shell to provide its distraction and fatigue tech — otherwise known as Guardian — to the latter’s fleet as part of its overall risk management plan.

Given that its workforce covers an estimated 500m kilometres every year (and what they are transporting tends to be rather flammable), this agreement makes clear sense from a safety perspective.

Naturally, it will take some time to fully implement this agreement. According to today’s statement, the installation of Seeing Machines’ tech is likely to begin this year. However, the sheer scale of Shell’s operations means the rollout might take “several years“.  

Still, an endorsement from Shell is hugely significant in my eyes. If you have one of the UK’s largest listed companies making it clear how much importance they place on driver safety, I think it’s fair to expect others to follow suit.

Naturally, it’s very easy to become biased on stocks one already owns. However, with the company being the global leader in this space, I do find it hard to be neutral on the outlook for this part of Seeing Machines’ business. 

Great outlook

Of course, today’s agreement is just one reason why I continue to hold the stock. Seeing Machines actually has its fingers in many pies at the moment. And, for me, the Guardian part of the business is actually the least exciting part.

The one that really grabs my attention is the huge earning potential of its automotive division. Back in August, the penny stock reported on the commencement of royalty revenues as over 100,000 vehicles loaded with its driver monitoring system (DMS) tech left showrooms. With the introduction of new legislation likely to boost demand, the company has already identified more than A$900m in potential revenue that it could/will now bid for.

On top of this, Seeing Machines has also been making moves into the aviation sector. This is the beauty of distraction-detecting tech — the sheer number of potential applications is hard to fully comprehend.

Long-term winner?

Naturally, any investment involves risk. Seeing Machines is no exception. Despite having a market cap of around £350m, this AIM-listed business is still unprofitable. This makes it particularly susceptible to general sell-offs. During the last market crash, for example, SEE’s share price fell from 5.5p in January 2020 to just 1.7p in March. It’s now at 9.8p, highlighting the huge volatility penny stock hunters should expect. One also can’t discount the possibility of future cash calls further down the line.

Along with would-be nickel miner Horizonte Minerals, however, Seeing Machines is one of few shares in my portfolio that I consider to be both very risky but also worth holding for the long term.

Time will tell if I’m fantastically right, utterly mistaken, or somewhere in between. For now, I’ll simply conclude that today’s news means I won’t be selling this penny stock anytime soon.  

The post This penny stock just signed a deal with Royal Dutch Shell! appeared first on The Motley Fool UK.

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Paul Summers owns shares in Seeing Machines Ltd and Horizonte Minerals. The Motley Fool UK owns shares of and has recommended Seeing Machines Ltd. 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.

I see no reason to bank my gains just yet. In fact, I’d be inclined to buy more.

Why is this penny stock motoring?

A recent, bullish trading update is one reason. On Tuesday, SEE said royalty revenues from its Automotive division had started as more than 100,000 vehicles left showrooms equipped with its Driver Monitoring System (DMS) tech. News of “significant growth” in its Aftermarket business (where SEE’s accident prevention products are installed in heavy vehicle fleets) was another plus.

All this allowed the firm to say it expected reported revenue for the year to the end of June to come in at A$47.3m. That’s up 18% from the previous year.

Importantly, the AIM-listed company now believes business will “increase sharply” over the next 2-3 years as new transport safety legislation kicks in. In fact, the mid-cap identified potential revenue of “over A$900m” from its automotive pipeline. A recent deal to install its tech into the Air Traffic Control environment (via Airservices Australia) also shows just how broad SEE’s markets might become in time.  

The second reason I think this penny stock is flying relates to last Thursday’s news that US chipmaker Qualcomm had made a $4.6bn bid for automotive tech firm Veoneer. A bidding war with rival Magna International may now ensue. This makes me even more confident that Seeing Machines will be snapped up for a tidy sum itself further down the road. 

Another false dawn?

As promising as I think this penny stock is, I need to be wary of bias when it comes to SEE. As a long-term holder, I’ve had my share of false dawns. From October 2017 to mid-June 2018, for example, the share price jumped 350%.

As tends to be the case with penny stocks, this rise couldn’t be sustained. A lack of news on contract wins, capital raises and the global pandemic led the shares to fall to below 2p in March 2020. 

Based on this performance, I wouldn’t rule out more volatility. Yes, having A$47.7m of cash at the end of June suggests SEE is a far less risky proposition than it was a few years ago. However, support could quickly disappear if markets wobble on news of a slowdown in economic growth.

Investors also need to be aware that talk of “new business wins” will only work in the company’s favour for so long. At some point, the market will need to see the evidence. There’s also a question mark over just how much of that A$900m pipeline SEE can really snag.

Multi-bagger potential

Notwithstanding these concerns, I think this penny stock is one that might trade for over a pound eventually. In fact, the huge growth opportunities for eye-tracking technology make me wonder if SEE’s share price could climb even higher than this already-lofty target.

By luck or skill (probably more of the former), I’ve been right on a few penny stocks in the past. While it’s always wise for me to maintain a diversified portfolio, I’m hoping this may be the case again here.

The post Here’s why this penny stock jumped almost 30% last week appeared first on The Motley Fool UK.

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Paul Summers owns shares in Seeing Machines. The Motley Fool UK owns shares of and has recommended Qualcomm. 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.

While such a great result over such a short period is more based on luck than anything else, it does show how quickly small-cap shares can move upwards (although the reverse is also true). With this in mind, here are three more I’ve got my eye on. 

Seeing Machines

First on my list is Australia’s Seeing Machines (LSE: SEE). This AIM-listed company supplies systems that monitor drivers’ behaviour, thus reducing traffic accidents. 

Yesterday, Seeing announced that it had been appointed by another Tier 1 supplier to deliver its FOVIO tech to an additional North America-based OEM. Although only worth A$7m, this is another vote of confidence for the company. 

I’ve held SEE for many years now. While this hasn’t always been a comfortable ride, highlighting the risk involved, I haven’t sold and am now firmly in profit. The shares are up over 500% since markets around the world crashed. 

There’s no saying that the shares won’t dip again (there have been many ‘false dawns’), especially if investors continue to lose interest in tech stocks. However, given recent progress, I’d still buy at this level.

The Fulham Shore

A second UK penny share that warrants consideration in my view is The Fulham Shore (LSE: FUL).

Shares in the owner of Franco Manca and The Real Greek restaurants are now almost 250% above the low hit in March 2020. That’s a terrific result and shows the potential rewards of buying what everyone is selling in troubled times.

Based on last week’s trading update, I think there could be more to come.

Last Friday, Fulham Shore announced that sales in the week to 18 April had been “very encouraging“. In fact, they were ahead of the same week in 2019, far before the word ‘coronavirus’ was on everyone’s lips. Naturally, this performance was achieved without any indoor seating. No wonder management is interested in expanding the company’s estate!

Taking this into account, I’d be tempted to buy a slice of this UK penny share now. However, I certainly wouldn’t bet the farm. A third wave of the pandemic is still possible.

Brickability

A third stock trading for pennies (just!) is blocks and bricks manufacturer Brickability (LSE: BRCK). Like SEE and FUL, the shares have enjoyed a storming performance recently — up 160% in just over one year.

It’s not hard to see why. Earlier this month, Brickability said that it would reveal revenue of roughly £180m and adjusted EBITDA of more than £17m for the last financial year. This was ahead of previous expectations.

Looking ahead, BRCK believes that demand for housing should lead to another strong year of trading. Unfortunately, there’s no guarantee of this. Also, many of those already holding this UK penny share might begin taking profits, causing the shares to dip.

That said, BRCK still trades on less than 15 times forecast FY22 earnings. A price/earnings-to-growth ratio of 1.1 also suggests investors are getting a lot of bang (or brick) for their buck. I think there’s still time to build a position here.

The post I was right about these UK penny shares! Here are 3 more I’d buy now appeared first on The Motley Fool UK.

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Paul Summers owns shares of Seeing Machines Ltd and Arc Minerals. 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.

So, what is this hot stock and why is it the flavour of the month? And should I lock in gains or buy more for my ISA? Here’s my take.

The soaring SEE share price

The name of the company in question is Seeing Machines (LSE: SEE). The Canberra-based business develops and supplies tech that monitors levels of fatigue and distraction in drivers. But we’re not just talking about cars here. The adaptability of its products means that Seeing can have its fingers in many sector pies, including off-road, fleet and aviation. 

As one might expect when it comes to the adoption of new technology, however, progress has felt painfully slow at times. Multiple fundraisings have tried investors’ patience, as has the ‘pop and drop’ behaviour of the share price. That said, many owners of the stock are, like me, perhaps in a more forgiving mood these days, I feel.

The gains seen in the SEE share price over the last few weeks appear to have been in anticipation of news released yesterday. This relates to confirmation that the company will partner with US computing giant Qualcomm Inc in designing a driver monitoring system. Perhaps most importantly for those already invested, CEO Paul McGlone stated that Seeing expects this relationship “to deliver significant incremental volume” on top of its existing business plan.

Having seen my stake in Seeing Machines rise so spectacularly since the beginning of 2021, I’m now left with a quandary.

Should I sell now or buy more?

One argument for selling is that some traders will seek to lock in some profit soon. This will likely make the SEE share price volatile or certainly more volatile than your typical FTSE 100 stock. 

As mentioned earlier, this is nothing new to those already invested. Back in June 2018, Seeing hit a share price high of almost 13p. In less than 12 months, it was back down at 3p. In the March 2020 market crash, it fell to as low as 1.7p. This is most definitely not a share for the faint-hearted. If I was a prospective investor now, I’d definitely go in with my eyes open. 

On the other hand, I find it hard to overlook the importance of SEE’s tech. Based on over 20 years of research, its AI driver safety systems already save lives and should continue to do so as safety features are mandated around the world. The link with Qualcomm could also lead the AIM-listed company to hit the radars of tech-obsessed investors across the pond. This could usher in more buying and more share price momentum. On a long enough timeline, I can even imagine the company being of interest to a deep-pocketed suitor. Not that such an outcome can be guaranteed, of course.

Staying diversified

I suspect I will retain my full position for now. But I need to ensure my position doesn’t become too large relative to my other holdings. A concentrated portfolio where only a few stocks dominate can be very risky if some fail. Some diversification is essential. 

For now, however, I’ll simply toast this development and salute the recent uplift in the SEE share price. 

The post The SEE share price is up 75% in January. Should I sell this hot growth stock now? appeared first on The Motley Fool UK.

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• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Paul Summers owns shares of Seeing Machines Ltd. 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.

So it’s always worth keeping an eye out for companies making positive moves in the market and here are two of July’s biggest winners from lower down the spectrum.

On the mend

Despite an awful 2018 in which the share price pretty much halved in value, I’ve always had a soft spot for veterinary services provider CVS Group (LSE: CVSG). After all, pet-obsessed Brits spend a huge (and growing) amount of money on their companions every year. That won’t change, regardless of what happens on 31 October. 

Aside from operating in a resilient industry, last week’s update for the year to the end of June also suggested trading at CVS has bounced back to health. At £406.5m, total revenue was 24.2% higher than in 2017/18. Earnings are also expected to be in line with the new targets set by analysts following the company’s positively-received update in June. 

Importantly, CVS revealed it had seen a fall in the number of vacancies for veterinary surgeons and nurses — an issue that had dogged the company for some time. This has, in turn, led to a reduction in locum spend and overall employment costs over H2. 

In other good news, the firm said the disappointing performances of its three new divisions (The Netherlands, Farm and Equine) earlier in the financial year had been reversed as a result of actions taken by management. Existing holders may also be reassured by the decision to adopt a more cautious approach with regard to future acquisitions to ensure the company doesn’t overpay in attempts to expand its estate. 

Shares in CVS are up 25% in July and currently trade on a valuation of 19 times forecast FY2020 earnings. While not exactly cheap, I think anyone buying at this level will probably still do well, considering the recent return to form.

Seeing gains

Another market minnow making impressive gains over the last month has been driver monitoring specialist Seeing Machines (LSE: SEE). Shares in the £140m-cap — whose technology helps spot when people are tired or distracted behind the wheel — have accelerated 42% in July alone, thanks to a flurry of positive news.

Only yesterday, the company revealed it had won a four-year contract with coach operator National Express to have its Guardian Driver Safety system fitted in around 700 of the latter’s vehicles by the end of 2019.

This win follows hot on the heels of last week’s announcement that Seeing’s FOVIO driver monitoring system (DMS) had been selected by an automotive Tier 1 supplier to be installed in additional models for an existing German OEM customer in an effort to meet the safety targets set down by the European New Car Assessment Programme.

“This important milestone confirms Seeing Machines’ ability to scale our technology and participate in a broadening DMS market, including entry level solutions targeting Euro NCAP goals,” said new CEO Paul McGlone. 

With the European Parliament also calling for driver monitoring technology to become mandatory in all new cars sold in Europe from 2022, I’m optimistic that Seeing Machines will continue attracting more attention from (risk-tolerant) investors going forward.  

The post These under-the-radar stocks popped in July. I think there could be more to come appeared first on The Motley Fool UK.

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• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Paul Summers owns shares in Seeing Machines. 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.

However, one possible solution could be to buy FTSE 100 shares that appear to offer wide margins of safety. They could provide improving total returns in the long run, with Vodafone (LSE: VOD) one possible example. It has a high yield, while a recent update suggested that it could offer an improving performance.

Could it therefore be worth buying alongside a small-cap share which released an update on Monday? Or, is retiring early becoming an impossible dream for many investors?

Improving prospects?

The small-cap in question is advanced computer vision technology company Seeing Machines (LSE: SEE). It released news that it will provide eye- and face-tracking sensor technologies to the Royal Australian Air Force (RAAF) for a new Pilot Training System. This is the first commercial programme agreement for the company’s aviation division, with its operator monitoring technology set to initially be installed in two Pilatus PC-21 flight training simulators. It’s expected to improve overall training efficiencies, as well as reduce cost and failure rate over the medium term.

Looking ahead, Seeing Machines may be well-placed to capitalise on increasing demand for its technology. Artificial Intelligence (AI) is becoming increasingly prevalent in a number of different industries and applications, with the business having the capacity to enjoy a tailwind over the long run as demand increases. While relatively risky and volatile, the stock could offer growth potential in the long run, in my opinion.

High income return

With Vodafone’s share price having declined by 29% in the last year, the stock now has a dividend yield which is twice that of the FTSE 100. It now yields 8.4%, which is exceptionally high compared to its historic levels. Indeed, it appears as though investors are expecting a severe dividend cut as a result of the company overstretching itself following its decision to move ahead with acquisitions in recent years.

While dividends could be reduced in the medium term, the company’s recent update suggested that its financial and operational prospects remain sound. Therefore, while there’s uncertainty surrounding the investment required to maintain a competitive position as the world gradually moves onto 5G, the prospects for the business may be stronger than the stock market is pricing in.

As such, now could prove to be the right time to buy the stock for the long term. It may experience further uncertainty due to investor sentiment being weak. But with a high yield, what appears to be a margin of safety, and the potential to deliver on its strategic goals in the coming years, it could offer high total returns relative to the wider FTSE 100.

The post Could the Vodafone share price help you retire early despite the rising State Pension age? appeared first on The Motley Fool UK.

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Peter Stephens owns shares of Vodafone. 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.

One stock which could perform well in the long run is defence company BAE (LSE: BA). It appears to offer a mix of value for money and growth potential. As such, it could be worth buying alongside a smaller stock which reported positive results on Wednesday.

Improving outlook

The company in question is advanced computer vision technology specialist Seeing Machines (LSE: SEE). It reported a rise in revenue in its financial year of 117%, with its top line reaching A$30.7m. Its Fleet division’s revenue increased by 89%, while Automotive revenue increased five-fold. It was able to secure production awards in the year to 30 June, with two premium German automotive original equipment manufacturers (OEM), as well as one global US-based OEM for multiple vehicle models in the 2019 to 2022 timeframe.

The company is seeking to transform the business model of its Fleet division in order to improve the deployment of capital and resources across the group. It is also seeing increasing demand from the global automotive sector for its driver monitoring system (DMS) technology.

As such, Seeing Machines could enjoy a tailwind over the medium term. DMS technology looks set to play a greater role in the transport sector, with autonomous driving and safety likely to be key growth areas in future years. While the company may be relatively risky and volatile, its long-term investment prospects appear to be improving.

Growth potential

The outlook for BAE and the wider defence sector has improved significantly in the last few years. Higher spending on the military by the US and an end to austerity across much of the developed world means that the financial prospects for defence companies across the globe could be boosted. This may lead to rising bottom lines and higher valuations.

With a price-to-earnings (P/E) ratio of around 16, BAE doesn’t appear to be excessively priced at the present time. The company is forecast to post a rise in earnings of around 9% in the next financial year, and this could help to stimulate investor demand for its shares. And with it yielding 3.7% from a dividend that is covered 1.9 times by profit, its total return potential seems to be high.

BAE is focused on driving through efficiency gains over the medium term. It is also seeking to advance and further leverage its technology in international markets, as well as adjacent markets. Its position as a major supplier across a number of segments means that it may be well-placed to identify new growth opportunities. Therefore, it could benefit significantly from global GDP growth and the return to higher military spending which seems likely to take place over the coming years.

The post Have £1,000 to invest? FTSE 100-member BAE’s share price could boost your retirement savings appeared first on The Motley Fool UK.

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Peter Stephens owns shares of BAE Systems. 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.

Reporting “continued growth across all business segments” this morning, group revenue at the small-cap rose 16% to just under £40m over the 12 months to the end of March.   

The diversified firm’s Foreign Currency Exchange and Retail divisions were the standout performers, with revenue growing 26% (to £11.3m) and 35% (to £8m), respectively. That said, the pawnbroking arm continues to tick along nicely with revenue here rising 14% to £7m. Precious metals revenue rose by a single percentage point to just under £11m.

The most interesting number to catch my eye, however, was the 242% increase in online jewellery sales over the reporting period. This, combined with the 117% rise in its Click & Collect currency exchange service, is further evidence that Ramsden’s focus on building its IT infrastructure and digital presence is really starting to reap benefits.

Speaking of which, underlying pre-tax profit soared by 60% to £6.5m, compared to the £4m achieved in the previous financial year.

Based on the 16.3p earnings per share achieved in 2017/18, Ramsdens is currently trading on a trailing price-to-earnings (P/E) ratio of just under 12. That still looks very reasonable considering the company also had a net cash position of £12.7m at the end of March, compared to £9.5m in the previous year. Aside from the value on offer, income hunters should also be encouraged by the 400%+ rise in the (easily covered) dividend from 1.3p to 6.6p.

Ramsdens might not shoot the lights out in terms of share price performance but, as a gentle grower in a market where many companies continue to over-promise and under-deliver, I believe it remains an excellent candidate for small-cap-focused portfolios.

Gathering speed

Of course, Ramsdens isn’t the only small business that could be a great buy at the current time. For those willing to take on a little more risk, eye-tracking technology specialist Seeing Machines (LSE: SEE) might fit the bill.

While there’s been lots of progress since I last covered the company back in 2016, things have really kicked into gear over the last few weeks, for two reasons.

First, there was news that the EU is to mandate Driver Monitoring Systems (DMS) — technology designed to monitor attentiveness/distraction — by 2020. Given its industry-leading status, this is clearly an excellent development for the Canberra-based business.

More recently, the £230m-cap announced a programme design win with a “global US-headquartered automotive OEM” (Original Equipment Manufacturer) to employ its FOVIO chip “into multiple vehicle platforms for mass production from 2020“. Although the name of the latter hasn’t been revealed, there are strong indications that it’s none other than Ford.

With other OEMs likely to begin/continue knocking on its door and confirmation that Euro NCAP — the vehicle safety advisory body — will favour camera-based systems as the preferred DMS option looking likely, it feels like Seeing Machines has hit something of a purple patch. 

Having climbed well over 100% in value since the beginning of May, a degree of profit-taking in the near future wouldn’t surprise. For those (like me) willing to continue holding, however, I think the biggest gains — and possibly a takeover bid, or two — are still to come.

The post These small-cap growth stocks still feel like the market’s best kept secrets. But for how long? appeared first on The Motley Fool UK.

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• Lost money on Diageo shares? Consider buying this £2.19 FTSE stock to try and make it up
• How much is needed in an ISA to target a £2,764 monthly passive income?

Paul Summers owns shares in Ramsdens Holdings and Seeing Machines. 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.

This 25% outperformance has come at a time when retailers have experienced a hugely challenging period. Consumer confidence has been weak, with inflation being ahead of wage growth.

However, the company has enjoyed a strong stock price recovery after a period of disappointment. Could it be worth buying alongside another potential recovery stock that reported disappointing news on Monday?

Resilient business

Next’s recent update showed that the company has been able to generate resilient performance despite tough trading conditions. In fact, its first quarter sales and profit performance was ahead of expectations, and this helped to lift investor sentiment.

Of course, this should not come as a major surprise for investors. The company was able to generate profit growth in the years following the financial crisis when inflation was also ahead of wage growth. As such, it seems to have a resilient business model that enjoys a competitive advantage over sector peers. Consumers appear to be loyal to the Next brand and with it having a strong balance sheet, this could lead to outperformance of the wider sector and index over the long run.

Growth potential

With inflation now being below wage growth, retail stocks such as Next could enjoy a more prosperous period. This could mean that they are able to beat sales and profit guidance over the medium term, which may help to justify higher valuations.

Although Next already has a price-to-earnings (P/E) ratio of around 15, it is forecast to post positive earnings growth in each of the next two years. As such, and with it offering greater resilience than many of its sector peers, it appears to have an attractive investment outlook. After a period of disappointment which saw its share price decline by 53% from November 2015 to July 2017, it seems to be on the road to recovery.

Turnaround potential?

Also offering the potential to deliver a successful turnaround is computer vision technologies specialist Seeing Machines (LSE: SEE). It released a profit warning on Monday, due to there being delays in the shipping of a number of its products.

This is because of a global shortage in traditionally short-lead-time parts such as capacitors and power supply which are used in its second-generation fleet product, Guardian Gen 2. As a result, Seeing Machines anticipates that sales for the current year will be between A$30m and A$35m, which is down from previous guidance of A$38m to A$43m.

Despite this, the company remains upbeat about its future prospects. It appears to have highly-relevant technology and could generate high growth across multiple transport sectors. As a result, it could be worth buying after today’s 9% share price fall, with its underlying performance continuing to be relatively upbeat in what remains a sector with high growth potential.

The post Next share price: why is it outperforming the FTSE 100? appeared first on The Motley Fool UK.

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Peter Stephens 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.

Unfortunately this doesn’t guarantee that they will be profitable for shareholders. This is why I’d only buy one of these stocks today.

Within sight of success?

Australian firm Seeing Machines (LSE: SEE) built its reputation by developing driver monitoring systems for giant mining trucks. These systems were successful at detecting drowsy drivers and reducing crashes due to fatigue, but the mining market is relatively small and specialised.

The company needed a large-scale move into the on-road truck fleet market to achieve profitable scale, and this is taking time. One of the problems facing the firm is that the costs of developing its technology appear to be quite high.

Today’s interim results provide a taste of the problem. Although revenue for the six months to 31 December rose by 267% to A$14.7m, the group’s operating costs rose by 55% to A$23m. As a result, losses for the period increased from $14.1m to A$16.7m.

The picture isn’t clear to me

In fairness, some of this increased loss was the result of an inventory build-up of its Guardian fleet product ahead of deliveries during the early part of 2018. Seeing Machines does expect a stronger financial performance during the second half of the year.

But the firm has confirmed that its full-year performance is expected to be in line with market expectations, which are for a loss of A$29.7m.

Why I’d sell

This stock has risen by about 65% since October, when management issued a bullish statement suggesting sales could rise from A$13.6m in 2016/17 to about $80m in 2018/19. Strong fleet and automotive revenues are expected to drive this growth.

On the strength of this, the firm raised £35m (A$62m) in a share placing in December. The group is now well funded, but there’s no guarantee it will have enough cash to reach profitability.

Indeed, it’s not clear to me when Seeing Machines will become profitable. That’s why I’d use the current price strength as an opportunity to sell.

Profitable analytics

One high-tech stock I am keen on is Oxford Metrics (LSE: OMG). This software group makes “analytics software for motion measurement and infrastructure asset management”. Activities include road management, medical analysis and Hollywood special effects.

This is a profitable business. Sales rose by 10.7% to £29.2m last year, generating a pre-tax profit of £3.7m. Although this was lower than the £5.1m figure reported one year earlier, this was largely due to investment in the business.

The group generated £2.3m of free cash flow last year and paid dividends of £1.2m, resulting in an increased year-end net cash balance of £9.8m.

Why I’d still buy

These shares have risen since I bought them for my portfolio. They now trade on a forecast P/E of 20 for the current year.

However, earnings per share are expected to rise by a hefty 37% in 2018/19, as recent investment bears fruit. This gives the stock a 2019 forecast P/E of 15, which I think is affordable for a growth business.

In the meantime, there’s a useful 2.1% yield, backed by a substantial cash pile. I continue to rate this stock as a buy.

The post One growth stock that could double, and one I’d sell today appeared first on The Motley Fool UK.

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Roland Head owns shares of Oxford Metrics. 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.