I don’t actually have to buy UK shares straight away though. Just putting my cash into my ISA before the end of the day is enough to utilise this year’s allowance.

However, I don’t see any reason for me to wait. I’m looking for the best penny stocks to buy before the markets close today.

There are plenty of quality penny stocks out there that I think are too good to miss. Here are a couple I think could deliver excellent returns.

Back of the net

The cost of living crisis is a danger to all retail stocks as consumer spending power falls. Fishing equipment specialist Angling Direct (LSE: ANG) is no exception. Though I’d argue that niche retailers like this are better placed to ride out the storm.

Angling is one of those passions for which spending tends to remain resilient during upturns and downturns. In fact I’m considering buying this penny stock given the pace at which the hobby is growing.

The number of anglers in the UK ballooned during Covid-19 lockdowns. Recent data from Statista suggests that there’s plenty more upside to come, too. It believes the European fishing equipment market will grow at an annualised rate of 6% to 2026 and be worth $2.9bn by then.

Angling Direct’s sales rose an extra 7.2% in the financial year to January 2022, continuing its recent strong momentum. And last month the business opened a distribution hub in The Netherlands to sell products across the European Union.

Another top penny stock

Sellers of expensive goods like car retailer Pendragon (LSE: PDG) are also in danger as inflationary pressures intensify. However, this is not the only danger as auto production problems persist.

Today the Society of Motor Manufacturers (SMMT) announced that new car registrations slumped 14.3% year-on-year in March. This was the worst result since 1998 and reflected the impact of “ongoing supply chain shortages” on car production.

The parts shortage issue has been exacerbated by the Covid-19 resurgence in China and the war in Ukraine. But despite these dangers, I’m still thinking of buying Pendragon shares. I think profits here could soar over the longer term as electric vehicle sales take off.

Riding the dragon

Even with that overall decline in March, the SMMT said that sales of these low-carbon vehicles exploded in March. Battery-powered vehicles for example soared 78.3% last month, with sales of 39,315 units representing an all-time monthly high. Tese figures illustrate the massive growth potential of this car class.

I for one expect EV sales to keep rising strongly as concerns over the climate worsen and charging infrastructure improves. Today Pendragon trades on a forward P/E ratio of just 9.2 times. I think this makes the penny stock too cheap for me to miss.

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Here are a couple of penny shares I would consider adding to my portfolio in April based on those criteria.

Angling Direct

Some people spend their spare time casting around in the stock market for promising shares to buy. Others prefer to rest on the riverbank casting for fish. The two come together in the form of Angling Direct (LSE: ANG).

The company is a retailer of angling supplies. As its name suggests, it has a sizeable digital commerce operation. But the company has also been building a network of retail branches. I think that two-pronged approach makes sense. The retail network can help build awareness of the company as well as serving anglers who prefer to buy in person. Meanwhile, the digital operation helps the company build national scale.

Even in a world with online retail beasts, I think there is a place for specialist retailers. Their focus and customer service can help them build a reputation with a particular target customer group. Anglers are often happy to spend on their hobby and I expect the popularity of fishing to endure. There are risks – for example, a cyber attack not only hurt the company’s reputation but also lost it some sales. That might happen again. But I am tempted to take a bite on the shares.

Assura

Another area I expect to experience enduring demand is healthcare provision. That requires staff, equipment, and medicines – but it usually also needs buildings. Whether it is a doctor’s surgery or ambulance depot, such buildings are likely to see ongoing use for many years.

One property company that has decided to focus on serving the healthcare sector is Assura (LSE: AGR). The business model here is quite simple: Assura builds or buys properties then lets them out to healthcare tenants. I reckon the profile of such tenants makes them attractive: they will often be happy to stay in one place for the long term, and have the resources to pay their rent on time.

If the portfolio is well chosen and maintained, I think that ought to add up to a profitable formula for success. Assura has raised its dividend annually over the past few years. It is firmly in growth mode, adding more properties to its portfolio. That brings additional risk as the company is carrying debt on its balance sheet. If it struggles to lease properties, servicing the debt could eat into profits. But I am positive about the firm’s business model and would consider adding it to my portfolio.

Penny stocks to buy now

I like the look of both Angling Direct and Assura as potential purchases for my portfolio. But I do not see them as penny stocks to buy now just because of their price. Rather, I reckon their strong business models could be profitable for years to come.

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But its performance over the past year was not spectacular before this week. It is up by nearly 25% now, but until its latest results were out, all the gains made over the year had been wiped out. So, its share price was not significantly above last year’s levels. 

I think this is an important point to consider when figuring out whether to buy the stock or not. 

What happened to the Angling Direct share price?

To answer the above question, I went back to its last results released in May. I had written about it then, and my sense was that its share price could continue to rise in the present environment. At that time, the environment was one of overall bullishness in the stock markets. The FTSE 100 index had been rising pretty much steadily for the last few months since vaccines were announced in early November. 

Since then, however, stock markets have been more moody. Longer-than-expected pandemic-related disturbances, rising prices and a slow recovery have weighed them down. I reckon this shows up in Angling Direct’s share prices as well, along with some expected moderation in growth from the lockdown boom. The penny stock had a value of 86p when its full-year results were released in May, and has fallen by more than 17% since. It did not help that its price-to-earnings (P/E) ratio at 26 times at the time, looks high in hindsight. 

What’s next for the penny stock?

However, I think fortunes may be about to look up for the now-beaten-down stock. Based on today’s results, I estimate its P/E ratio calculated from the last 12 months’ earnings is around 13 times. This is half the P/E it had until a few months ago.

This alone makes it an attractive stock to me. Especially considering that strong earnings growth it has recently seen. Its earnings per share, for instance, are up by 83% from last year. So, at the current share price, its P/E could fall even more if it keeps up with this performance over the rest of the year. This could make it even more attractive. 

What I’d do

I think we can continue to expect a rise in its share price over time from this point on, barring any unforeseen developments with the company. I do not, however, think that it will rise fast. The broader environment has weakened considerably. Numbers on the UK’s recovery released yesterday show continued sluggish growth. And while the company has not so far been affected by inflation, it does say that it is not immune to cost pressures. 

But for my long-term investments, I still think this is a stock to buy. 

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As a long-term investor however, I’m not put off by the prospect of any short-term price volatility. This is because I do proper research to identify quality before buying UK shares of any price. This way I can be confident that, over an extended time horizon, any penny stocks I buy will rise in value just like any other stock. And I can potentially make lots of money in the process.

With this in mind, here are two top penny stocks I’m thinking of buying for my Stocks and Shares ISA today.

A gaming great

Online gambling has gone from strength to strength in recent years. City analysts don’t think this phenomenon is anywhere close to running out of road either, which is great news for Gaming Realms (LSE: GMR).

This UK penny stock designs and licences casino games for mobile devices, putting it in one of the box seats for the next decade. Fortune Business Insights reckons the internet betting market will be worth $158.2bn by 2028. This compares with the $74.2bn it’s been estimated at this year.

Encouragingly, Gaming Realms is making sound progress in the gigantic US marketplace too. It’s been granted supplier licences this year in both Pennsylvania and Michigan. And last month, it launched its Slingo Originals games in Michigan with industry giant BetMGM.

It’s true that Gaming Realms operates in a highly-regulated environment, representing a clear danger to future earnings. But the popularity of its brands and its games, allied with its ambitious expansion in this fast-growing marketplace, should still make its investors handsome returns, in my opinion.

Catch a top penny stock

Fishing has long been a popular British pastime, and the number of people taking up the hobby has boomed since the Covid-19 outbreak last year. The Environment Agency sold a staggering 1.02m individual freshwater rod licences to adults living in England last year. This was up 16% on an annual basis and bodes extremely well for penny stock Angling Direct (LSE: ANG). Sales at the retailer rocketed 27% higher in the 12 months to January.

Angling Direct isn’t just making a splash in its home markets however (turnover here rose 31% last year). Revenues in its core European territories of Germany, France and The Netherlands soared between 29% and 44% in fiscal 2021.

The penny stock’s strong online proposition has also helped to turbocharge revenues growth over the past 12 months. As has its position as a one-stop shop for everything the fisherman needs to cast off.

But competition is fierce and the likes of Amazon pose a severe threat to future profits. However, I still think Angling Direct has the mettle to also generate great shareholder profits in the years ahead.

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N Brown shows sharp share price rise

One of them is the penny stock N Brown (LSE: BWNG), which is up 283% over the year. Yet its share price is still way below the highs at which it started 2020. 

Considering that the UK lockdown easing is in full swing and the outlook for the consumer economy is full of optimism, it would appear that N Brown’s prospects are brighter now.

Consider pre-crisis trends

But I would take a step back before assuming this. The fact is that unlike other FTSE stocks, this penny stock started falling way before any stirrings of the stock market crash were visible. In January 2020 alone, its share price lost half its value. 

This can be correlated with its weak performance even pre-2020. Its first update in 2020 was for the 18 weeks ending January 4 2020, when it reported a 5% revenue decline. This followed a 5.4% fall in its half-year report earlier in 2019. It had also already seen a double-digit debt increase. 

Weak financial performance

After the coronavirus crisis of last year, it is no surprise that it is in an even weaker position. But I think that the clothing and homewares provider can begin to recover from here, going by the apparent pent-up consumer demand. At the same time, I would like to see that in its numbers before buying the stock. If it continues to stay weak despite a strong economy, I am not sure I can bet on its recovery. 

Angling Direct posts strong results

At the other end of the spectrum is fishing equipment retailer Angling Direct (LSE: ANG) that reported fantastic full-year results for the year ending January 31 earlier today. Its revenues were up 27% and pre-tax profits were up a whole 279%, more than wiping out the losses from the year before.

Its financial year 2022 has also started strong. Additionally, its share price is robust, but still below all-time-highs seen in 2018. It has a price-to-earnings (P/E) ratio of around 26 times after its latest results, which in the present investing environment suggests to me that its share price can rise further. 

It is a relatively illiquid stock, so buying and selling it may be less easy than that for big FTSE 100 stocks. Its share price performance has also been somewhat erratic overtime, though it is up 45% in the past year. 

The upshot

Overall, I think that its financial performance in a year when retailers were challenged is noteworthy. It has upgraded its online platform, opened four new stores and is looking to expand in new markets in Europe. It is a buy for me. 

The post What I’d do about these 2 high-performing penny stocks now appeared first on The Motley Fool UK.

Royston Wild: Angling Direct 

I’m expecting a sunny set of numbers when Angling Direct (LSE: ANG) releases its full-year financials on Tuesday, 11 May. I think the retailer’s share price — which is already up over 120% over the past year at the time of writing — could rise strongly again. 

In its most recent update this penny stock said that it had retained “positive sales momentum,” and that revenues were tipped to have risen 27% in the 12 months to January 2021. Angling Direct has a history of lifting profits guidance in recent times thanks to strong progress on lifting margins and excellent sales via its online channel, too.

Beware, though, that Angling Direct trades on an elevated forward price-to-earnings (P/E) ratio of 50 times. This leaves the UK share in danger of a sharp share price reversal if sales growth shows signs of moderation. 

Royston Wild does not own shares in Angling Direct. 

Rupert Hargreaves: IP

IP (LSE: IPO) develops intellectual property-based businesses like Oxford Nanopore Technologies. IP owns 15% of this business valued at £340m. The ultimate sale price could be significantly lower or higher when it IPOs later in 2020.

I think the best way to look at the business is to consider its book value growth as a measure of wealth creation. Book value has grown at a compound annual rate of 11.3% since 2015. 

As the company gears up for the Oxford float, I think its stock could be worth buying, although if the float flops, IP could be left nursing large losses.

Rupert Hargreaves does not own shares in IP.

Dan Peeke: Diageo

With the hospitality sector reopening, alcoholic drinks company Diageo (LSE:DGE) is my top stock for May.

In short, after months without the pub, Brits are going to treat themselves. Diageo owns an incredible portfolio of premium brands – from Guinness to Tanqueray to Johnnie Walker – that are all going to be in high demand. Its share price had already risen by 10% in the first four publess months of 2021, so with sales increasing, its growth should be even more pronounced.

Of course, there’s always the chance that reopening venues is a disaster that reignites the pandemic and sends Diageo’s sales back down… but I’m feeling confident at the moment.

Dan Peeke owns shares in Diageo.

Paul Summers: Burberry

The share price of luxury firm Burberry (LSE: BRBY) has recovered fairly well over the last year as normality has returned to its key Asian markets. Even so, it’s still 10% below the highs hit in early-2020 (at the time of writing). 

Back in March, the blue-chip company revealed that revenue and adjusted operating profit would now likely be “ahead of consensus expectations”. Should this be confirmed in May and accompanied by a positive outlook statement, I think there’s a good chance we will see this gap close. As the great unlock continues, I’m holding tight to my stock.

Paul Summers owns shares in Burberry.

Harshil Patel: Howden Joinery 

Howden Joinery (LSE:HWDN) is a leading manufacturer and supplier of fitted kitchens. It has steadily grown its earnings over several years and could be well placed to benefit from a rise in homebuying.  

Several schemes and incentives are supporting the UK residential property market. A new government-backed mortgage scheme will help home buyers with just a 5% deposit. Stamp duty incentives are also currently still in place. 

Overall, this quality consumer cyclical stock offers double-digit margins, earnings growth and return on capital. It’s also conservatively financed and trades at an undemanding valuation.  

Harshil Patel does not own shares in Howden Joinery.

Edward Sheldon: JD Sports Fashion

My top stock for May is JD Sports Fashion (LSE: JD).

The reason I like JD is that, right now, many consumers are cashed up after months of lockdown. I think JD could benefit in the months ahead as the global economy reopens and consumers head out to spend their savings. JD could do particularly well in the US (where it now generates over a third of sales) due to the fact that many US citizens have received stimulus cheques.  

JD can be a volatile stock at times, so it’s not going to be suitable for everyone. However, overall, I think the risk/reward proposition here is attractive.

Edward Sheldon owns shares in JD Sports Fashion.

Roland Head: ITV

Television group ITV (LSE: ITV) had a difficult year in 2020. But the group is already reporting an improved outlook for 2021. I expect this recovery to continue.

Although the company continues to face tough competition from big streaming services and the decline of broadcast television, I do not think that ITV’s share price reflects the potential value of its programme production business.

Analysts’ forecasts suggest earnings will rise steadily over the next couple of years. With the stock trading on 11 times 2021 forecast earnings and offering a 4.4% dividend yield, I continue to view ITV as a buy.

Roland Head owns shares in ITV.

Nadia Yaqub: Diageo

Lockdown restrictions are easing and as people start to socialise they are likely to eat and drink out. I think Diageo (LSE: DGE) is well placed to capitalise on this. The beverage company has a diversified portfolio of over 200 brands including Johnnie Walker and Smirnoff.

It derives a significant portion of its revenue from the emerging markets. Here, Diageo’s brands are seen as a symbol of status for the growing affluent class. I think this region has further growth potential. The shares also offer an attractive dividend yield of over 2%, which is covered by earnings.

Nadia Yaqub does not own shares in Diageo.

Kirsteen Mackay: Tate & Lyle 

FTSE 250 stock Tate & Lyle (LSE:TATE) is hoping to sell a controlling stake in its artificial sweeteners division to help streamline the company and futureproof its growth prospects. By retaining a minority stake it won’t entirely lose out if this arm continues to grow its profitability.

This division could potentially sell for £1.2bn, according to the Telegraph. The proceeds would be used to help Tate & Lyle reduce its debt pile and turn its attention to becoming more competitive in its higher margin food and drinks division.

I like the growth potential in this stock and its 3.6% dividend yield. 

Kirsteen owns shares in Tate & Lyle.

Zaven Boyrazian: Saga

Saga (LSE:SAGA) is a travel and insurance business. For years its share price has fallen due to mismanagement.

But in 2020, Saga’s original owner, Sir Roger De Haan, made a sudden return. He injected £100m into the business, replaced the old management team and is now restructuring the entire company.

Based on the most recent results, it looks like the new strategy is working. Advanced cruise bookings for 2021-2023 increased by 20% despite the disruptions from Covid-19. And the insurance division finally started growing again.

There are plenty of risks and challenges ahead. But I believe Saga is capable of making a comeback over the long term. And so, I’m considering adding it to my portfolio while it’s still cheap.

Zaven Boyrazian does not own shares in Saga.

Christopher Ruane: C&C Group

C&C Group (LSE: CCR) is the drinks company that owns famous brands such as Magners and Tennent’s Lager. It has been hit hard by the pandemic.

While supermarket sales have held up well, the pub business has suffered badly. C&C also owns a drinks wholesaler and part of a pub chain. While there is a risk patrons won’t frequent pubs as much as they did before the pandemic, the reopening of many pubs across the UK still bodes well for its prospects in my opinion.

Christopher Ruane owns shares in C&C Group.

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One reason for this could be the uncertainty surrounding the UK’s economic outlook. With Brexit under a year away and the prospects for the economy being downgraded recently by the Bank of England, this may not be a major surprise. But for long-term investors, it could present a buying opportunity for UK-focused stocks such as Barratt.

Positive outlook

Despite the risks facing the UK economy at the present time, the outlook for housebuilders remains relatively upbeat from a fundamental perspective. Interest rates were kept on hold this month, and it seems unlikely that there will be more than one rate rise before the end of the year. This could help to support demand for new-build houses – especially since their supply remains somewhat limited.

Furthermore, Barratt could benefit from policies such as Help to Buy, which has been a major catalyst for housebuilders’ financial performance in recent years. It has focused first-time buyers on new-build properties, rather than older ones. Its continuation could mean that the housebuilding industry enjoys further growth over the next few years.

Low valuation

With Barratt due to post a rise in its bottom line of 6% this year and 5% next year, the company appears to be performing relatively well. Despite this, it has a price-to-earnings (P/E) ratio of around 10, which suggests that it may be undervalued at the present time.

Certainly, Brexit has the potential to cause disruption to the UK economy. Thus far, confidence among businesses and consumers has weakened, and this trend could continue over the coming months. Therefore, volatility for the company could be high. But with a positive outlook and a low valuation, it could outperform the FTSE 100 over the long run.

It’s a similar story with other UK-focused stocks, and there could be significant investment opportunities available for investors. Reporting on Monday was UK retailer Angling Direct (LSE: ANG), which may also offer growth at a reasonable price.

Impressive performance

The UK’s largest fishing tackle retailer reported revenue growth of 44% for the 2018 financial year. Its operating profit increased by 27%, with acquisitions and new store openings contributing to its overall performance. And with online sales increasing by 54%, it seems to be well-placed to capitalise on continued growth in digital services across the economy.

The investment made by the business in marketing campaigns and in customer service initiatives seems to be paying off. It has enjoyed a strong start to the current financial year, and is on track to meet its guidance.

With Angling Direct expected to deliver a rise in its bottom line of 63% in the current year, it appears to be a strong growth stock. Its price-to-earnings growth (PEG) ratio of 0.6 suggests that it has a wide margin of safety and may be able to deliver impressive share price growth despite the risks from Brexit.

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However looking ahead, the company appears to have turnaround potential. Certainly, it could take time for it to deliver improved share price performance. But it could be worth buying alongside another stock which also appears to offer growth at a reasonable price.

Strong performance

The company in question is the UK’s leading fishing tackle retailer Angling Direct (LSE: ANG). It reported a positive trading update on Friday which showed that revenue for the year to 31 January was ahead of expectations, up 44% versus the prior year. It performed well across its retail and e-commerce divisions, with investment in its online platform and operations resulting in a 54% rise in direct sales.

Clearly, there is uncertainty facing the company. Structural changes in retail buying habits and weakness in the UK consumer outlook could result in greater competition. However, the company remains upbeat about its prospects, with its strong competitive position and the prospect of continued investment both having the potential to aid future performance.

Looking ahead, Angling Direct is expected to report a rise in its bottom line of 63% in the current year. Despite this, it has a price-to-earnings growth (PEG) ratio of just 0.5, which suggests that it may be undervalued at present. With a relatively loyal customer base and a dominant position in what remains a large industry, the company could be a worthwhile buy for the long run.

Return to growth

Of course, the outlook for Saga is still relatively uncertain. The company is due to report a 2% decline in earnings for the current year as it makes significant changes to its management structure and strategy following a disappointing period. But this is expected to have a positive impact on its financial performance, with earnings growth of 2% forecast for next year.

As such, it appears as though the company could take time to return to its previous rate of growth. In the long run though, that looks very achievable. Demand for a range of services among the over-50s is likely to remain buoyant, with an ageing population having the potential to create a tailwind for the company. And with Saga trading on a price-to-earnings (P/E) ratio of 8.9, it seems to offer a wide margin of safety. This could mean that it’s able to offer high capital growth potential in the long run.

The company also has a relatively high dividend yield as well. Following its share price fall, it stands at 7.7% and is covered 1.5 times by profit. This suggests that it’s not only highly sustainable, but could increase in future.

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