Both are tipped to deliver spectacular earnings growth, as well as provide solid dividend income, in the next two to three years. And they appear to be dirt cheap at current prices.

Trifast

Trifast (LSE:TRI) manufactures industrial fastenings. And its share price collapsed at the start of the year. It fell as weakness across multiple end markets and geographies hammered sales of its products.

Touch conditions might prevail as Chinese economy splutters. But analysts expect sales to accelerate sharply as falling global interest rates boost demand in the key automotive, electronics, and smart infrastructure markets.

Encouragingly these sectors look poised for solid growth over the long term too. This could help its share price balloon from current levels.

Trifast is tipped to increase earnings by a spectacular 277% this financial year (to March 2025). Healthy growth of 40% and 21% is tipped for fiscal 2026 and 2027, respectively, as well.

As a consequence, Trifast’s price-to-earnings (P/E) ratio topples over the period, from 13.6 times this year to 9.7 times the year after, and 8 times the year after. This is based on its current share price of 82p.

On top of this, the manufacturer’s price-to-earnings growth (PEG) multiple remains below 1 throughout the period. Any reading under this threshold indicates that a share is undervalued.

Penny stocks aren’t famed for offering decent dividends. This is because small-cap shares typically invest any spare cash they have for growth rather than distributing it to shareholders.

However, a strong balance sheet means Trifast is tipped to offer decent dividends and growing through the next three years too. The dividend yield is 2.7% for this year, and rises to 3% and 3.3% for financial 2026 and 2027.

Facilities by ADF

Facilities by ADF (LSE:ADF) is another rare penny stock that offers investors a strong and growing dividend.

The annual reward is expected to rise by almost three-quarters next year. And so a 2.8% dividend yield for this year leaps to a market-beating 4.9% for 2025.

This prediction reflects City estimates that earnings will rise 264% and 90% in 2024 and 2025 respectively.

The company provides mobile production facilities to Britain’s creative industries. We’re talking about production offices, make-up vans, and so on. It has significant growth potential as global studios increase investment in Britain’s film and TV industries.

Facilities… is spending on acquisitions to exploit this opportunity too. Be aware, however, that M&A-based growth strategies come with execution risk. And its purchase of Autotrak in August is especially bold — a price of up to £21.3m is huge given the company’s market cap is just over £57m.

At 53p per share, Facilities… trades on a P/E ratio of 10.5 times for 2024. And this topples to just 5.5 times for next year.

With its PEG ratio also falling below 1 for these years, I think it’s a top small cap for value seekers to consider.

The post 2 cheap penny stocks for growth AND dividends! appeared first on The Motley Fool UK.

Should I consider buying either of these shares today? Let’s take a look.

OMG: a bargain buy?

Tech group Oxford Metrics (LSE: OMG) currently has a market cap of £77m and a share price of about 60p.

However, the group also has net cash of about £45m. This bumper cash pile is the result of the sale of the group’s Yotta business for £52m in 2022.

What this means for shareholders is that the remaining Vicon business is effectively being valued at around £32m. The remainder of the market cap is covered by net cash.

Vicon makes motion capture systems used in television and video game production. It looks a decent business to me.

Broker forecasts show Oxford Metrics’ earnings rising by 36% to 2.9p for the 24/25 financial year. That puts the stock on a forward price-to-earnings (P/E) multiple of 20.

However, if I strip out the group’s net cash, this multiple drops to just 8.3.

In addition to this, the shares also offer a useful 5% dividend yield.

For me, the risk is that management will spend the company’s cash badly. They may pay too much for acquisitions. Or they may buy businesses that subsequently fail to perform.

I reckon these risks help to explain why Oxford Metric’s current 60p share price is a long way below City brokers’ average price target of 147p.

Even so, I’m interested. I plan to do some further research on this business.

Turnaround time

Last year’s Hollywood strikes may have seemed a long way from the UK. But the disruption they caused had a significant impact on UK companies involved in television production.

One such business is Facilities by ADF (LSE: ADF), which provides mobile production facilities to the UK film and TV industry.

This AIM-listed small-cap floated in January 2022. It currently has a market cap of £55m and a share price of 51p.

When I looked at ADF after its IPO, I was impressed. The company was generating double-digit profit margins and strong rates of growth.

Unfortunately, things have gone off track. ADF’s recent half-year results revealed a 30% drop in revenue during the first half of 2024, compared to the same period last year.

Another concern for me is ADF’s decision to expand through acquisitions. A recent deal for a portable roadway business looks fine in itself, but it will cost up to £21m. That’s nearly half the current market cap.

The good news is ADF’s core markets seem to be returning to normal:

Trading at the end of H1-FY24 finished strongly, with the order book for the second half of the year building well across the summer months as momentum returns across the market following the Strikes.

– Facilities by ADF

At around 51p, ADF is trading on a 2024 forecast P/E of nine, falling to a P/E of just five for 2025. Brokers have an average price target of 93p on the stock.

I certainly think the shares could be worth more if the business can return to growth. However, it’s a recent listing and has just made a big acquisition. I’m going to stay on the sidelines for a little longer yet.

The post City experts think these penny stocks could rise by at least 80% appeared first on The Motley Fool UK.

In other words, we’re not simply looking to cash out when a former penny stock hits the big time. Instead, as Fools, we’re looking for long-term investments in quality — but perhaps underappreciated — companies.

Facilities by ADF

What it does: ADF provides serviced production facilities to the film and television industry in the United Kingdom.

By Mark David Hartley. Currently trading at 56p per share with a market cap of £44.9m, I think Facilities by ADF (LSE:ADF) has strong growth potential.

Its price-to-earnings ratio (P/E ratio) is 7.5 times and earnings per share (EPS) growth rate is 32.5%. With this, I can calculate its price/earnings to growth (PEG) ratio by dividing the P/E ratio by the EPS growth rate:

7.5 / 32.5 = 0.23

In general, a good PEG ratio is considered to be anything less than 1.0. ADF’s PEG ratio of 0.23 indicates the company is significantly undervalued and likely to experience positive growth soon.

However, ADF has a high level of non-cash earnings, resulting in weak cash flow relative to earnings. This could indicate lower quality earnings which could threaten growth. Furthermore, it lacks a significant dividend track record and recently diluted shareholder earnings by issuing 6.5% more shares.

Mark David Hartley does not own shares in Facilities by ADF.

Revolution Beauty

What it does: Revolution Beauty sells make-up, skincare and hair products to major retailers, as well as selling online. 

By Jon Smith. If it’s possible to have an undervalued penny stock, I think Revolution Beauty (LSE:REVB) fits the bill. Since the IPO in 2021, the stock has been hit hard with a lengthy accounting scandal. With both the CEO and CFO now out of the business, I think the storm has passed.

With a market cap of £96m and a share price gain of 20% over the past year, I think the firm can get back to better days when the firm was larger in size. With boohoo holding a 27% stake in the firm and appointing former CFO Neil Catto to serve at Revolution as of January, I believe the business is ready to start a new chapter.

Fundamentally, the business has good clients and is present in major retail stores. It has the right platform to grow, although the hangover from the accounting problems could linger for longer than I expect.

Jon Smith does not own any of the shares mentioned.

Springfield Properties

What it does: Springfield is a Scottish housebuilder with a focus on building private and affordable housing.

By Roland Head. I’m optimistic about the outlook for Springfield Properties (LSE: SPR), especially after the firm recently reported a new £15m affordable housing contract.

The company says that reduced build cost inflation has allowed to start bidding for new projects again, after a temporary pause. Over the last eight months, £40m of new contracts have been signed.

Despite this improved outlook, Springfield’s shares are continuing to trade well below the book value of its land and property assets. These were last reported at about 125p per share, well above the current share price.

The risk is that in a housing market downturn, the value of Springfield’s assets could fall. Debt problems are another potential concern, but my feeling is that the company’s finances look safe enough for now.

If Springfield’s trading continues to recover this year, I think the shares could gradually re-rate to trade above their book value, as they have done previously.

Roland Head does not own shares in Springfield Properties.

Topps Tiles

What it does: Topps Tiles is a tile, stone, laminate and and flooring retailer, and sells related products.

By Alan Oscroft. The Topps Tiles (LSE:TPT) share price recovered quickly from the Covid pandemic. But it then got a kicking from the property market slump.

The shares have lost around a third of their value in the past five years. And that takes Topps down into penny stock territory, with a share price of under 50p and a market cap of around £92m.

I think we might see weakness ahead, with some delay between mortgage rates starting to soften and the demand for building materials picking up.

And a price-to-earnings (P/E) ratio of 13 might not look all that cheap for 2024. But forecasts show it dropping as low as 8.5 in 2025 with earnings set to rise sharply.

I treat forecasts with caution. But if it comes off, I think we could be looking at a winner here.

And while we wait, there’s a forecast dividend yield of 8%.

Alan Oscroft has no position in Topps Tiles.

The post 4 penny stocks Fools don’t think will be below £1 much longer appeared first on The Motley Fool UK.

In 2022, for example, S&P Market Intelligence believes lithium demand will rise to 641,000 tonnes versus supply of 636,000 tonnes. The pace at which electric vehicle sales — and by extension demand for the critical battery material — are increasing means that the lithium market could remain in deficit well beyond this year.

Things are looking good for Atlantic Lithium, then, a company that operates the Ewoyya lithium project in Ghana. Drilling results from the asset have remained highly promising, a theme that has helped the penny stock gain 75% in value over the past year. Though remember that any setbacks in developing Ewoyya could send Atlantic’s share price down.

Another penny stock on my watchlist

I think auto parts builder Surface Transforms (LSE: SCE) could also help me make big returns this decade. The engineer isn’t a specialist in the field of electric vehicles, though. Instead it manufactures ceramic brakes that help high-performance vehicles stay glued to the road. It’s therefore well placed to capitalise on rising sports car demand.

Latest financials from Aston Martin underline how strongly sales of such vehicles are rising as the number of high-wealth individuals around the globe increases. The luxury carmaker said that it boasts “a healthy orderbook for all core vehicles” and that it plans to sell 6,600 vehicles via its wholesale channels in 2022, up 7% from last year’s levels.

Surface Transforms has experienced some production troubles of late due to issues at one of its newly-commissioned furnaces. Such problems are a constant threat to engineers like this that can hit revenues hard. However, I think the firm’s manufacturing expansion programme could in the long term help to supercharge profits as sports car sales grow.

The film star

You might not have heard of penny stock Facilities by ADF (LSE: ADF) before. This low-cost share only began trading on the London Stock Exchange in January. But it plays a crucial role in bringing our favourite films and TV shows to the screen. Put simply, it rents out specialist vehicles and trailers that are critical in the production process.

We’re talking about mobile make-up rooms, costume trailers and production vans, that sort of thing. And today the business is thriving thanks to “continued robust demand for film and high-end television” in the UK. In fact it advised in February that profits would beat expectations in 2021 thanks to a strong end to the year. Equipment failure is an ever-present risk that could damage future sales, but as things stand, business is going swimmingly.

And I think it could prove a highly lucrative pick for the long term as investment in British TV and film production heats up. Amazon, for example, has just signed a multi-year contract to make programming for its Prime streaming service at Surrey’s Shepperton studios in the latest example of this trend.

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