Direct home shopping retailer

As an introduction, N Brown is a digital UK retailer specialising in clothing and footwear. It has recognisable brands under its umbrella including Jacamo, and Simply Be. Notably, it has roots stretching back over 160 years and is currently supported by close to 2,000 employees.

So what’s the current state of play with the N Brown share price? As I write, the shares are trading for 21p. At this time last year, the stock was trading for 47p. This is a 55% discount over a 12-month period.

Risks and the reasons behind the N Brown share price fall

I believe N Brown shares have come under pressure in recent months due to macroeconomic headwinds out of its control. Soaring inflation, the rising cost of raw materials, as well as a supply chain crisis have all contributed.

For example, soaring costs can eat into profit margins, which can then impact shareholder returns as well as investor sentiment. Supply chain issues negatively affect day-to-day operations such as product availability. Due to rising inflation, a cost-of-living crisis has emerged. Many consumers have less money to spend on clothing and footwear, as they prioritise food and energy, both of which have risen in price.

Finally, competition in the clothing and footwear market has intensified in recent years. This is linked to the rise of online fast fashion. More traditional retailers, like N Brown, are seeing more competition from companies that are able to make the most of the fast fashion trend and offer cheaper products to consumers.

Positives and my verdict

In terms of the positives, N Brown’s diversified business model is a plus point. It caters for different markets, such as the plus size market, as well as more affluent consumers through its JD Williams brand. The plus size offering, in particular, has risen in prominence in fashion in recent years. In addition, I believe N Brown’s long history sets it in good stead to be able to navigate times of volatility, like now, with useful experience.

Due to the N Brown share price drop, the shares look cheap currently on a price-to-earnings ratio of just over six.

So what about N Brown’s performance? Although I do understand past performance is not a guarantee of the future, I review it to learn more about a business. Looking back, I can see it has recorded consistent, although slightly falling, revenue and profit for the past four years. An interim report released today for the 26 weeks ended 27 August was a mixed bag. Revenue and profit dropped, but on a positive note, debt levels fell, and net cash increased. Both of these will help boost potential growth initiatives, as well as investor sentiment, in my opinion.

To summarise, it is clear to me that N Brown shares are a victim of current volatility. For this reason, I am going to keep them on my watch list for now. I will continue to monitor developments to see if I should change my stance in the near future.

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Digital retailer

As a quick reminder, N Brown is a top 10 digital UK clothing and footwear retailer. With over 160 years history of trading, it employs close to 1,800 people in the UK. You may have heard of some of its retail brands including JD Williams, Simply Be, and Jacamo.

So what’s happening with the N Brown share price currently? As I write, the shares are trading for 25p. At this time last year, the stock was trading for 53p, which is a 52% decrease over a 12-month period.

Many stocks have come under pressure due to macroeconomic headwinds and the tragic events in the UK, and N Brown is no different. This includes many of my best shares to buy. Could this stock be a bargain with a view to a long-term recovery?

To buy or not to buy?

So what are the pros and cons of me buying N Brown shares?

FOR: I like the look of N Brown’s diversified business model. It is a leading retailer in the plus-size clothing market through its brands Simply Be and Jacamo. Furthermore, it also targets the more affluent 45-65 year old through JD Williams. Despite near-term challenges, this diversification could be the key to growing revenue and profit, and providing returns to its investors.

AGAINST: Well documented macroeconomic issues could hamper N Brown. Soaring inflation, the rising cost of materials, and the global supply chain crisis could have a material impact on profitability and operations. With costs rising, N Brown could see margins squeezed. In addition to this, operations could be affected due to supply chain constraints. All this could impact any returns I would hope to make as an investor.

FOR: I do understand that past performance is not a guarantee of the future. But looking back at N Brown’s track record, I think this is a positive point. I can see it has recorded consistent revenue and profit for the past four years. This was even during the challenging pandemic period. I want to see performance levels return past pre-pandemic levels, although 2022 results weren’t far off. Finally, the shares look good value for money on a price-to-earnings ratio of just seven.

AGAINST: The rise of online fast fashion, and the shift away from the high street has been seen as a positive by many. For N Brown, this is an issue for me as it means competition is more intense than ever. Competitors will try to take market share and this could have an impact on performance and returns in the longer term.

My verdict

I think N Brown Group is a bit of a hidden gem with excellent growth prospects ahead. The shares currently look dirt cheap and I’m buoyed by its diversified business model. Its long trading history and roots also help me believe that it has the experience and know how to navigate stormy waters.

Overall I would be willing to add a small number of N Brown shares to my holdings and keep hold of them for the long term.

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The prospect of a sharp economic slowdown threatens to harm business investment in all, or most, areas. This includes the amount spent on reinforcing IT systems from external threats.

Yet NCC Group could hold up strongly, in my opinion, given the huge costs a company faces if an attack happens. This is an area in which corporate spending could in fact remain pretty solid.

Government statistics show that 39% of British companies were hit by a cyber attack in the 12 months to March. This resulted in an average cost of £4,200. For just medium- and large-sized businesses the figure rose to a whopping £19,400.

A cheap UK growth share

NCC provides a range of cyber-security-related services such as creating security assessments and producing software escrow agreements. And City analysts expect earnings here to keep growing strongly over the medium term.

NCC’s earnings are predicted to increase 18% and 10% in the financial years to May 2023 and 2024 respectively. This follows the 15% increase brokers think the business will report in the outgoing fiscal year.

Pleasingly, these forecasts mean the company looks exceptionally cheap at current prices. At 207p per share, NCC trades on a forward price-to-earnings growth (PEG) ratio of 0.9. A reading below 1 suggests that a stock could be trading below value.

Finally, I also like this cheap UK share because — unlike many other tech shares which invest heavily for growth — NCC also provides a dividend to investors.

For the soon-to-begin financial year and fiscal 2024, yields here sit at a healthy 2.3% and 2.5% respectively.

Retail therapy

The near-term outlook for many UK retail shares is darkening as the cost of living crisis worsens. But it’s my opinion that niche retailers like fashion business N Brown Group (LSE: BWNG) will be better placed to weather the shock.

Through its Jacamo and Simply Be brands, N Brown is a major player in the fast-growing ‘plus-size’ market. What’s more, its JD Williams division caters to shoppers within the more affluent 45-65 age range. This could be a particularly useful profit boosting division for these tough times.

N Brown’s latest financials last week show how resilient trading its business model is. Sales at the ‘strategic brands’ mentioned above rose 9.9% in the 12 months to February.

A top penny stock

Despite the problem of intense competition, I think N Brown’s niche offer makes it a great buy. And especially so at current prices of 32.2p per share.

City analysts think the penny stock’s earnings will fall 17% year-on-year. This leaves the business trading on a super-low forward price-to-earnings (P/E) ratio of 5.6 times.

I think this valuation fails to reflect N Brown’s long-term profits potential as its key demographic markets grow sharply. I think the retailer is a cheap UK share worth serious attention today.

The post 2 cheap UK shares to buy right now! appeared first on The Motley Fool UK.

Latin fever

Companies that produce the key metals present in electric vehicle (EV) batteries look set to thrive this decade. One such penny stock on my watchlist for May is Horizonte Minerals (LSE: HZM).

This commodities business has plans to pull vast amounts of nickel and cobalt from Brazil’s Vermelho and Araguaia projects in the next few years. Horizonte still has a long way to go before first production and this creates risks to shareholders. Problems on this front could ruin earnings forecasts and force fresh fundraising efforts.

In my opinion though, the prospect of exploding EV sales still makes Horizonte Minerals an attractive stock to buy. The growing scramble for cobalt for instance was underlined by the multi-year supply agreement General Motors signed with FTSE 100 miner Glencore this week.

A top gold stock

Buying gold stocks is another investing idea I’m entertaining for May. In particular I’m looking at Centamin (LSE:CEY) owing to its massive 5.1% dividend yield for 2022.

Precious metals prices soared again this week on news of another shocking jump in US inflation. Prices are rising sharply all over the globe too, and look set to continue doing so as the ongoing Covid-19 and Ukraine crises disrupt supply chains.

It’s not guaranteed that gold prices will rally again and give Centamin a significant profits boost. The US dollar could rebound, for instance, if the Federal Reserve hikes central rates more sharply than the market expects. This would hit bullion demand by making the shiny commodity more expensive to buy.

Still, it’s my belief the outlook for gold prices lie on the upside rather than the downside. So do analysts at TD Securities who believe gold could be poised to touch 2020’s record highs around $2,070 per ounce. Besides, at current prices, I think Centamin’s monster dividend yield is too good to miss.

A great fit

Buying retail stocks could throw up some shocks for investors in the short-to-medium term. A combination of sinking consumer spending and rising costs threaten to hit profits at these firms hard.

N Brown Group (LSE: BWNG) could be considered particularly risky right now as well. For one, it does not operate in a downturn-proof market like food or household goods. And its clothing business could lose customers to cheaper chains like Primark and Bonmarche too.

Still, over the long term, I think N Brown could deliver mighty profits growth. And following recent share price weakness I reckon it could be too cheap to miss. The penny stock currently trades on a forward price-to-earnings (P/E) ratio of 5.4 times.

Put simply, N Brown is a specialist in producing clothes for plus-size and middle-aged-and-older customers. These are two demographic groups that are growing strongly. And N Brown serves these customers with its popular brands such as Simply Be and Jacamo.

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Retail sales fall

N Brown undoubtedly faces some significant dangers as the cost of living crisis worsens. According to the Centre for Economics and Business Research (CEBR), retail sales unexpectedly slipped 0.3% in February. It noted that “price rises in excess of earnings growth are now eroding consumer spending power”.

Clothes sales continued to rise in February. However, in my opinion these are also in danger of reversing sharply. As the CEBR noted: “the squeeze on household budgets is set to worsen over the coming months.”

Rising costs

On top of this, N Brown’s profits are under immense threat from rising costs. In fact the retailer’s share price collapsed on 3 March after it advised adjusted EBITDA in the current fiscal period (to February 2023) would match that of fiscal 2021 due to increasing outgoings.

The business said “we expect the well-publicised inflationary headwinds to affect our wider cost base” this year.  It added that freight rates — which were tipped to moderate — would likely remain “at an elevated level” in financial 2023 too.

Packed with potential

The threat to N Brown in the near term is climbing. But as someone who invests for the long haul I’m still thinking of adding the battered penny stock to my shares portfolio today. Recent share price weakness leaves the business trading on a forward price-to-earnings (P/E) ratio of 4.9 times. This is well inside the widely regarded bargain territory of 10 times and under.

I primarily like N Brown because of its focus on the plus-size segment of the fashion market. Its Jacamo and Simply Be brands pride themselves on catering to the needs of larger customers. This is a strategy that could pay off handsomely as this demographic grows.

Analysts at Statista, for instance, think that the global plus-size clothing market will be worth $260.8bn by 2028. That’s up a whopping 34% from 2021 levels.

I also like N Brown’s commitment to customers who are middle aged and older through its JD Williams brand. This division makes fashionwear for people aged between 45 and 65, a section of the population that it also tipped for robust growth this decade.

A top penny stock to buy

I also like N Brown’s decision to evolve into an online-only business. It ditched its mail-order model several years back and more recently shuttered all of its stores. By focussing investment on its websites, it’ll now be better placed to capitalise on steady growth of e-commerce over the next decade.

I’m aware that N Brown’s share price could suffer fresh weakness in the weeks and months ahead. But as a long-term investor, I’m encouraged by its strategy of focussing on fast-growing fashion markets, one I think could deliver explosive profits growth. At recent prices, I think it’s a great penny stock for me to buy.

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However, penny stocks can also offer better-than-average returns if investors get it right. Buying into fast-growing companies early on offers a lot more share price upside than investing once they’re established.

Here’s a cheap penny stock I’m considering buying today. I think it could deliver exceptional shareholder returns over the next 10 years.

A value retail star

The pressure is rising on household finances and consumers will have to box clever to survive. One way they are likely to do this is by shopping at value retailers like N Brown Group (LSE: BWNG). This penny stock sells affordable clothing in wider size ranges than most others in the industry.

Recent trading at N Brown suggests the firm is already capitalising on the shopping budget squeeze. Sales of its core strategic brands (Jacamo, JD Williams, Simply Be, Ambrose Wilson and Home Essentials) rose 5.5% in the 18 weeks to 1 January.

On a headline level N Brown’s product sales dropped 3.5% year-on-year. However, this reflected the managed decline of its other non-core brands. Demand for N Brown’s main brands (which account for four-fifths of product turnover) is quite solid.

A dirt-cheap penny stock

My main fear for N Brown relates to signs of a worsening supply chain crisis. A recent survey shows that shipping delays into Europe from China are getting larger, and suggests the problem will last long into 2022. This raises the prospect of higher costs and emptier warehouse shelves for retailers like N Brown.

Still, it’s my opinion that the retailer’s rock-bottom share price reflects the danger this poses to profits. At current prices of 38.3p per share this penny stock trades on a forward price-to-earnings (P/E) ratio of 5.4 times for this financial year (to February 2022).

Growth hero?

City analysts reckon N Brown’s earnings will drop 10% in this outgoing financial year. But they also believe the outlook is sunnier over the medium-to-long term. It’s why they believe annual profits will leap 13% and 21% in fiscal 2023 and 2024 respectively.

N Brown isn’t just in great shape to ride the growing importance of value to the modern consumer. I personally like its focus on selling products in two potentially-lucrative demographic areas: plus-size and mature shoppers.

The government estimates that one in five people will be aged 65 and above by 2030. This bodes well for N Brown’s Ambrose Wilson division, for example, a brand which it says “truly values the mature customer”.

Meanwhile the market for larger-size clothing is growing rapidly due to changing perceptions over health and beauty. Analysts at Allied Market Research think this market will grow at an annualised rate of around 6% between 2021 and 2027.

So I think N Brown could have the tools to deliver terrific shareholder returns during the next decade.

The post A cheap penny stock I’d buy to hold for 10 years! appeared first on The Motley Fool UK.

5.3% dividend yields

The British Retail Consortium has advised that “retail faces significant headwinds in 2022 as consumer spending is held back by rising inflation, increasing energy bills, and April’s national insurance hike.” I think buying low-cost retailers is a good idea as British shoppers feel the pinch.

People might trim spending on clothing but they won’t stop shopping entirely. They’ll switch down to budget operators like ABF-owned Primark and the likes of penny stock N Brown Group (LSE: BWNG). This particular operator owns increasingly-popular brands like Jacamo and Simply Be.

I think these brands’ focus on people needing larger sizes could help N Brown thrive beyond the near term too. And so could its JD Williams division, which focuses on those aged between 45 and 65. This demographic group, like the plus-size bracket, is growing rapidly.

At the current price around 41p N Brown trades on a forward P/E ratio of six times. The retailer also boasts a 2.2% dividend yield for the outgoing financial year (to February 2022), moving to a meaty 5.3% for the following 12-month period. I’d buy it even though ongoing supply chain problems pose a threat to the company’s bottom line.

A non-penny stock on my radar

I believe soaring data demand in sub-Saharan Africa could make Airtel Africa (LSE: AAF) a terrific long-term buy. Personal income levels are rising sharply on the continent while the telecoms market remains underpenetrated. This provides an exciting blend for this ‘nearly’ penny stock to exploit.

Analysts at GSMA Intelligence put smartphone penetration in Africa at just 50%. What’s more, the vast majority of handsets still run at 2G and 3G speeds. The likes of Airtel Africa then should benefit from the steady uptake of 4G demand and, further down the line, 5G.

As a long-term investor I’m also very excited by the company’s mobile money operations. When combined, Airtel Africa’s voice and data services generate more than 80% of group revenues. But the rate at which its financial services revenues are rising suggests massive potential. Sales here rocketed 42.7% at constant currencies in the six months to September. By comparison, data and voice revenues rose 33.7% and 17.3% respectively.

It’s important to remember a bumpy post-coronavirus recovery could hit demand for Airtel Africa’s services, however. The World Bank predicts that GDP growth of 3.6% this year and 3.8% in 2023 in sub-Saharan Africa. Though it warns that these forecasts could be blown off course if low vaccination rates in the region lead to a resurgence in Covid-19 infections.

That said, from a long-term perspective I believe the potential rewards for Airtel Africa investors far offset the risks. At 139p this low-cost UK share trades on a forward P/E ratio of 13.5 times. A handy 2.7% dividend yield provides an added sweetener for me.  

The post A penny stock and 1 other cheap UK share I’d buy today! appeared first on The Motley Fool UK.

Penny shares for growth

The first company on my list is N Brown (LSE: BWNG). I am wary of investing in the retail sector in general because of the ongoing shift from physical to online retailing.

However, N Brown is now a pureplay digital retailer. I think this gives the company an edge in the competitive retail landscape, although it is not immune from sector competition. 

After a rough 2020 and 2021, where sales declined more than 20%, analysts expect growth to return in 2022. Based on current growth projections, the stock is selling at a forward price-to-earnings (P/E) multiple of around 6. That looks cheap compared to the industry average, which is around 12 to 14. 

Based on this valuation and the company’s competitive advantage, I think the stock could increase in value over the next few years as growth returns. 

Unfashionable industry

Unfashionable sectors tend to be good places to hunt for discount shares. Smiths News (LSE: SNWS) is a great example.

The newspaper and magazine distributor operates in a slow and steady unfashionable industry, which is nowhere near as exciting as some of the hot sectors of the market like technology. 

Still, the company does provide an essential service, and after the disruption of the pandemic, it looks cheap. While revenues are expected to decline over the next two years, efficiency initiatives will help it improve bottom-line growth, according to City analysts. 

Based on these projections, the stock is selling at a forward P/E multiple of just 4. This makes the company one of the cheapest penny shares on the market. 

That said, I am under no illusion newspaper distribution is a declining business. Profit margins are also razor-thin, leaving no room for error.

These are the biggest challenges the organisation faces. Nevertheless, I do not think it will take much for the market to reevaluate the stock and its potential. This could lead to a substantial increase in the company’s share price. 

Construction sector growth

The final company I am highlighting is tool and equipment hire business HSS (LSE: HSS). There are two reasons why I like this business right now. First, the construction sector in the UK is booming, which could provide a solid tailwind to support the group’s growth in the years ahead. 

At the same time, the company is starting to reap the benefits of a multi-year transformation plan. City analysts believe the firm could report a net profit of £4m for the 2021 financial year, thanks to these twin tail winds. To put this into perspective, over the past six years, the corporation has lost a total of £130m. 

Based on analysts projections, the shares are trading at a 2022 P/E of 6.2.

The most significant danger here is the risk the company could go back to its old ways. If costs rise significantly and the construction market starts to stagnate, losses could return. 

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Petropavlovsk

Penny stock Petropavolvsk (LSE: POG) is one UK share on my watchlist. I think that gold prices will rise as inflationary pressures increase and doubts over the economic recovery persist. Of course there’s no guarantee that yellow metal values will increase. A mix of central bank rate hikes to curb exaggerated price rises and a resurgent US dollar could even push bullion values much lower.

But I still think having exposure to gold could be a good idea as an insurance policy for when trouble comes along. Gold’s surge to record highs during 2020’s coronavirus crisis proves this point perfectly.

I’d do this by buying shares in gold producing companies like Petropavolvsk rather than investing in the metal itself. This gives me a chance to potentially grab dividends now and further down the line. And I think a P/E ratio of just 6 times for 2022 could make it too cheap for me to miss. I also like this mining company’s highly-efficient and low-cost POX Hub gold production process where output is steadily ramping up.

Coats Group

Coats Group (LSE: COA) is trading strongly as clothing sales bounce back following strict Covid-19 lockdowns. As a major supplier of threads, zips and trims, demand for its product is rising solidly. Revenues here rocketed 22% at constant currencies in the four months to October, its latest financials showed. Sales were also up 6% versus the same 2019 period.

Sales growth is poised to slow, naturally, though I like the steps Coats Group is making to drive long-term sales. An increased focus on sustainability for example could deliver big rewards (sales of its 100% recycled EvoVerde thread range are expected to have doubled year-on-year in 2021). I’d buy this penny stock even though the issue of sustainability is growing in importance for consumers. This has the potential to hit so-called fast fashion volumes hard.

N Brown Group

Buying retail stocks can be risky business. A case can be made that this sector is particularly dangerous today as supply chain issues persist and the British economy stalls. But I think the potential rewards at some retailers outweigh the risks and this is where N Brown (LSE: BWNG) comes in. This particular company owns popular clothing brands like SimplyBe and JD Williams.

I like this particular stock for a number of reasons. It sells its product at affordable price points. This could make it a winner when consumer confidence is slipping and inflation is rising as is the case today. I also like its focus on the fast-growing ‘plus size’ segment which looks set to continue growing strongly. Analysts at Allied Market Research think the market for larger garments will be worth $696.7m by 2026, up from $481m in 2019. I also like its successful entry into the homewares market, a segment that has boomed in the past few years.

The post Best shares to buy: 3 top penny stocks for 2022! appeared first on The Motley Fool UK.

N Brown sells value clothing through brands such Jacamo and JD Williams. I’m confident this should serve the company well as shoppers try to stretch their shopping budgets. I think the retailer’s focus on the plus-size and older markets could pay off handsomely as well. These demographic groups are growing rapidly.

Finally, I believe N Brown’s decision to scrap its stores and focus solely on e-commerce might give revenues a significant boost as online shopping continues to rocket ever higher. I’d buy this cheap UK share even though rising raw material costs could put profit margins under fresh pressure.

Take a ride with this electric vehicle stock

The electric vehicle (EV) revolution provides plenty of potential for UK mining shares. Take Horizonte Minerals (LSE: HZM) as an example. This metals digger owns the Vermelho nickel and cobalt prospect in Brazil, from which it hopes to produce 24,000 tonnes of material over 38 years, once it’s operational.

Analysts at Macquarie predicted last month that nickel demand for EV production will rise by up to 20 times between now and 2030. Horizonte could be in one of the box seats to exploit this phenomenon.

Horizonte has made huge strides recently in getting its other major asset, the Araguaia ferronickel mine, off the ground too. In November, it sealed a $633m funding package (including a $197m rights issue) for the construction of the Brazilian mine. The project is now fully financed and maiden production is scheduled for two years from now.

Horizonte’s large-scale projects offer the business plenty of profits potential. But I’m aware that any hiccups with exploration or development at Araguaia or Vermelho could have a significant impact on shareholder returns.

A penny stock for property fans

Surging inflation also bodes well for property stocks in 2022. This is because property prices and rental income both tend to rise in this sort of environment. I’d buy Civitas Social Housing (LSE: CSH) as a result, though it wouldn’t be the only reason. Residential landlords like this could be some of the most robust property stocks next year as the UK economy cools.

Civitas might prove to be a great share to own from a longer-term perspective too. Britain has a colossal shortage of social housing which looks set to persist. This should keep rents at properties like this chugging nicely higher, irrespective of inflationary impacts.

One final thing. At current prices, Civitas Social Housing boasts a mighty 5.8% forward dividend yield. I’d buy this penny stock despite the threat that its growth strategy could stall if decent acquisition opportunities fail to appear.

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