But they also have the potential to be financially rewarding investments due to their small size. Here, I’m going to consider whether I should buy two unloved penny stocks currently trading at 52-week lows.

Podcasts

The first stock is podcast developer Audioboom (LSE: BOOM). I’m familiar with this stock as it’s been on my watchlist for a couple of months now. Unfortunately, it’s fallen 28% in that time, and is down a massive 76% over the last year.

What’s gone wrong here?

Well, the shares had already taken a hit due to concerns about a slowdown in global advertising spend. And the company’s first quarter confirmed these fears, as its underlying earnings plunged from $900,000 last year to $200,000.

Audioboom’s chief executive Stuart Last said that “in the medium to long-term, we are confident that brands continue to trust podcasting as a key part of their marketing strategy“.

He also expects the group to deliver year-on-year growth as the ad market recovers. However, the US is still teetering on the edge of a recession this year, so it’s possible that companies could keep a lid on their ad spend.

This remains a risk for the stock, given the fact that the firm is struggling to eke out a profit as it is.

That said, I remain bullish on the future of podcasting around the world. Plus, Audioboom recently renewed a multiple-year deal with Formula One to produce, distribute, and monetise its extremely popular official podcasts.

I’m going to keep the stock on my watchlist for now, as it could be an interesting turnaround play, assuming the US avoids a recession.

Low-maintenance building products

Epwin Group (LSE: EPWN) is another stock on my watchlist. But unlike Audioboom, this is a company that is regularly profitable. Indeed, the stock is trading on a forward price-to-earnings (P/E) multiple of just 7.2, which demonstrates how unloved it is.

The reason isn’t hard to fathom. The Solihull-based firm sells building products, including energy-efficient windows, doors, and fascia systems, at a time when the property market is in the doldrums.

The risks are clear, but already seem more than priced in considering the stock has fallen 40% in 18 months.

Yet the business remains resilient, as it announced last week that current revenue is running 3% higher than this time last year. And the intense inflationary pressures it has faced for the past two years, particularly for raw materials like PVC resin, appear to be easing.

The company has low net debt and is operating in an industry with favourable long-term tailwinds. The biggest of these relates to the UK’s need to decarbonise its ageing housing stock to meet its net zero ambitions.

The group’s products have inherently strong environmental credentials, and would seem likely to be in high demand over the coming years.

Plus, the stock comes with a dividend yield of 7%, with the prospective payout covered two times by earnings. I think I’m going to promote this penny share to my buy list in the coming weeks.

The post 2 penny stocks at 52-week lows! appeared first on The Motley Fool UK.

Tuning in

Audioboom Group (LSE: BOOM) is a London-based global podcast publisher. It connects podcasters and advertisers with tens of millions of listeners.

It offers hosting, publishing, distribution, analytics and monetisation services and has partnerships with all the major platforms, including Apple Podcasts, Spotify, and Amazon Music.

According to Edison Research, it was the fourth largest podcast publisher in the US between October 2021 and September 2022.

Its popular titles include No Such Thing As A Fish, the UK’s Cycling Podcast, and F1: Beyond the Grid. And it recently announced a partnership extension with Formula 1 up to 2025.

Strong results

“The story of 2022 was of record revenue, record adjusted EBITDA profit, and record cash generation for Audioboom.”

Stuart Last, CEO of Audioboom

On Thursday, it released solid annual results for 2022. Revenue was up 24% year on year to $74.9m. That was significantly ahead of overall industry growth of 15%. Adjusted EBITDA profit rose 15% to $3.6m.

It averaged monthly downloads of 117m, a 19% increase. And its monthly brand advertiser count rose significantly, up 60% to 5,257. Management attributed that big jump to its ‘Showcase’ advertising marketplace that works with the likes of LinkedIn and Sky.

Chairman Michael Tobin commented that this boosted market share and the business is “fully primed” for further growth in 2023.

Indeed, the company declared its first ever dividend in light of this operational progress. The planned payout is for at least 8p per share and is scheduled for 2024.

Despite this, the shares have fallen 77% in 12 months. Much of this decline is due to a slowdown in the digital ads market. Major tech companies such as Alphabet and Meta have recently reported that brands and retailers have cut back on advertising.

There’s a risk that a further deterioration here could harm the firm’s growth trajectory and threaten its profitability. However, I’m encouraged that the company has so far managed to carry on growing despite this downturn.

Plus, the company did have $8.1m in cash at the end of 2022, with an additional $1.8m available via an undrawn overdraft. I think that should be sufficient to see out this weakness in digital adspend without the need to raise more capital through the sale of shares.

A potential rebound

Reports last year suggested that Spotify and Amazon were interested in acquiring Audioboom. However, no concrete bids ever materialised. But I think interest may be rekindled now that the company’s market cap stands at just £68m.

All in all, I think the firm’s future looks promising. Over 400m people listen to podcasts today, and that figure is growing every year. And I fully expect the digital ad market to recover at some point, with the company in a strong position due to the additional advertisers it has signed up.

So I believe there’s the potential for a rebound in the share price. And if I had some spare cash to invest, I’d buy this penny stock today.

The post 1 penny stock down 77% that I’d buy today! appeared first on The Motley Fool UK.