One pick that I came across recently is Coats Group (LSE: COA).

Let’s pick apart the business and break down my investment case.

Laying the threads bare

Coats Group is one of the leading thread manufacturers in the world with a presence in over 100 countries. It supplies thread as well as other sewing supplies to its customers that are mainly in the apparel and footwear industry.

The shares have had a good 12-month period, rising 27%. At this time last year, they were trading for 76p, compared to current levels of 96p.

To buy or not to buy?

Starting with the bull case, there’s lots to like about Coats Group, in my view. Firstly, I reckon the business has defensive traits. This is because no matter the economic outlook, or consumer budgets, clothes are an essential purchase for all. We all need to wear them, as much as this heat makes me want to wear much less. In addition to this, the firm’s vast presence and experience are also plus points.

Next, Coats’ most recent update, a half-year report released at the beginning of August for the six months ended 30 June 2024, made for good reading. From a financial view, revenue increased by 7% compared to the same period last year. Also, earnings per share, margin levels, its dividend, and free cash flow were all up. Net debt was down, which is also a good sign. From a strategic view, cost-cutting and streamlining operations has helped the firm save millions.

Speaking of dividends, a yield of 2.3% helps my investment case. However, it is worth mentioning that dividends are never guaranteed.

Moving to the other side of the coin, Coats shares could have some growth priced in already. They trade on a price-to-earnings ratio of 18. This could be seen as high, and if earnings or trading took a dent, the share price could fall.

Another worry for me is inflationary impact on costs and margins due to global economic volatility. Increasing costs could dent profitability and returns.

Finally, I’ll keep an eye on its balance sheet and debt levels. Although it looks to have come down recently, it still stands close to $350m. Even if it’s manageable, this is a sizable amount to service and manage, especially in a high interest environment.

My verdict

In my view, Coats’ market position, experience, recent trading, and future outlook are all favourable. The current value of the shares is a bit of a downer. However, the firm’s defensive ability is hard to ignore, as well as the passive income opportunity.

When I next have some investing funds, I’d be willing to buy some Coats shares for returns and growth.

The post I reckon this growth stock has untold potential! appeared first on The Motley Fool UK.

AstraZeneca

What it does: AstraZeneca is a global biopharmaceutical company specialising in oncology, rare diseases, cardiovascular, and other areas.  

By Ben McPoland. I’ve viewed AstraZeneca (LSE: AZN) as a perfect starter stock for a few years now. Therefore, I’d happily add it to my SIPP, ISA, UK ISA, or whatever investing account acronym comes along next. 

And the recent Q1 results have only served to strengthen my view. The firm beat expectations on both the top and bottom lines and confirmed a 7% increase to the dividend for 2024.

Its oncology revenue grew 26% to $5.12bn. Meanwhile, its other businesses, including rare diseases, also saw double-digit growth during the quarter.

One issue is that R&D and marketing costs are rising, which is worth keeping an eye on. However, this is aimed at driving future growth, so I’m not too worried. 

Another potential risk is the increasing criticism of CEO Pascal Soriot’s pay package. He may decide enough is enough and retire or move to the US, where high pay for success isn’t such an issue. Having overseen a 300%+ share price increase inside 12 years, he would be sorely missed.

Despite nearing an all-time high, the stock still seems reasonably valued at 17.5 times forward earnings.

Ben McPoland owns shares in AstraZeneca.

Burberry

What it does: Burberry is a global luxury goods manufacturer, retailer and wholesaler

By Paul Summers. If the British ISA is eventually introduced, I’d be tempted to devote a portion of my £5,000 allocation to Burberry (LSE: BRBY) stock. 

This might seem a strange pick. The firm has had an awful time of late with the cost-of-living crisis hitting sales, particularly in important markets like China. This has caused Burberry’s share price to more than halve in just one year.

Things could conceivably get worse before they get better. But I think these headwinds are temporary. When interest rates are eventually cut and discretionary income increases, I can see the stock recovering strongly. In the meantime, there’s a 4.4% dividend yield to enjoy.

The biggest risk for me is that Burberry, with its rich heritage and iconic check pattern, will be snapped up on the cheap before the luxury goods sector is back in favour. 

Paul Summers has no position in Burberry

Coats Group

What it does: Coats is a world leader in thread manufacturing and structural components for apparel and footwear.

By Jon Smith. When looking for a stock to fly the British flag for my ISA, I came across Coats Group (LSE:COA). The share price is up a modest 4.4% over the past year, but I like it as a defensive share for my portfolio.

As a world leading thread manufacturer, I think demand should be constant even if major economies including the UK head into a recession. This could be due to inflation rising again and interest rates staying elevated for longer.

The businesses is supplies goods rely on thread and other sewing supplies as a necessity. This should allow the share price to remain supported even during tricky times. Of course, a risk here is that it could underperform if the UK economy booms, as investors will pile into riskier growth stocks. Yet as a hedge for the rest of the year and beyond, I think it makes sense.

Jon Smith doesn’t own shares in any firm mentioned.

JD Sports Fashion

What it does: JD Sports is a UK high street retailer offering premium athleisure goods and sports equipment. 

By Charlie Keough. Plenty of UK-listed shares look like good value for money at the moment, especially JD Sports Fashion (LSE: JD.).

Its shares have suffered over the last 12 months. A profit warning due to weakened consumer spending will tend to do that to a stock. However, at 117.5p a share as I write, I think JD stock has plenty of growing room.

The firm’s growth in the last decade has been incredibly impressive and it’s showing no signs of stopping anytime soon.

It opened 215 new stores during the 53 weeks to 3 February 2024. More widely, JD has laid out its intentions to invest between £500m to £600m annually from 2023 to 2028, with the bulk of this going on expanding its physical presence in the US and Europe.

Today, I can pick up its shares trading on around 11 times forward earnings. I think that’s a steal.

The threat is that as the cost-of-living crisis goes on JD will continue to operate in a tough trading environment.

But focusing on the underlying business, I believe the long-term prospects for JD look positive.

Charlie Keough does not own shares in JD Sports Fashion.

Rightmove 

What it does: Rightmove operates a property portal that allows users to search for properties to buy or rent. 

By Edward Sheldon, CFA. Rightmove (LSE: RMV) ticks pretty much every box from a ‘quality investing’ perspective. 

For starters, it has a very strong brand. Thanks to the power of this brand, it has a huge share of the UK property search market.  

Secondly, it’s very profitable. Over the last five years, return on capital employed (ROCE) has averaged an astonishing 285% (making it one of the most profitable companies in the FTSE 100).

Third, it has a great growth track record. This year, revenue is forecast to rise about 8%. 

Finally, it has a strong balance sheet and a rising dividend. 

Now, there is some uncertainty due to US online property search company CoStar’s recent move into the UK market (it bought OnTheMarket). This is likely to increase the level of competition. 

However, I reckon Rightmove will continue to prosper. And at its current valuation (a P/E ratio in the low 20s), I think the stock looks attractive. 

Edward Sheldon owns shares in Rightmove 

The post 5 quality UK stocks to consider buying for the new ‘British ISA’ appeared first on The Motley Fool UK.

There are plenty of bargains out there that fly under-the-radar, if you ask me.

Two picks that caught my eye recently are Costain Group (LSE: COST) and Coats Group (LSE: COA).

Here’s why I reckon both stocks could be shrewd investments for me right now. I’d love to buy some shares if I had the spare investable cash.

What they do

Costain is a sustainable infrastructure solutions provider with roots stretching back to 1865. In simple terms, it builds pivotal structures, such as public services buildings, roads, railways, and more.

The shares have been on a great run recently. They’re up 31% over a 12-month period from 60p at this time last year, to current levels of 79p.

Coats Group is the world’s largest thread and structural components manufacturer for apparel, footwear, and other materials.

Unlike Costain, Coats shares have meandered up and down over a 12-month period. Ultimately, they’re up 2% from 77p at this time last year, to current levels of 79p.

Costain’s investment case

Costain’s track record and history in helping infrastructure move forward is unrivalled, in my view. This could play a big part in future growth too, as the UK is looking to spend big in this area as ageing facilities need to be revamped. Furthermore, a rising population also needs to be catered for.

Full-year results posted last month showed a large order book, as well as increased profit levels, margins, and the reintroduction of a dividend. These are just some key positives I noted.

The shares look cheap to me on a price-to-earnings ratio of eight. A dividend yield of 1.6% sweetens the pot too. However, I do understand that dividends are never guaranteed.

From a bearish view, the cyclical headwinds of the economy have hurt Costain in the past, and could do so in the future. For context, economic issues can dampen infrastructure spending. The pandemic is a prime example of this happening, and current economic woes won’t be helping the firm either.

Coats’ investment case

I reckon Coats is a great stock to buy for eventual recovery, as well as growth and returns. The shares may not trade at current levels for long. A P/E ratio of 13 looks attractive to me for a business that provides the thread for a quarter of the whole world’s clothing! Furthermore, a yield of 2.8% helps my investment case.

I’m aware that the fashion industry has been hit hard by volatility across the globe. Issues including tighter margins, and stock control as consumer spending has weakened have hurt the firm. I reckon it’s also the reason the shares have been held back too. If this continues, the shares may continue to struggle, and returns could be impacted.

A good track record of cash generation, and what looks like a healthy balance sheet, could help stave off issues during the current malaise. When the retail sector recovers, I’d expect Coats shares to climb upwards.

The post 2 overlooked cheap shares I’m tipping to eventually soar appeared first on The Motley Fool UK.

Many companies in the FTSE 250 mid-cap index have growth potential. But I’d focus on two for deeper research with a view to holding for five years, or longer. Although I don’t have any spare cash to invest right now.

The first is Coats (LSE: COA), the industrial threads company. This month’s full-year results report trumpeted: “10% organic revenue growth, 22% organic adjusted operating profit growth and strong free cash flow”.

Enhanced forward prospects

Chief executive Rajiv Sharma said the company made “excellent” progress transforming its business during 2022. And the acquisitions of Texon and Rhenoflex in the period have strengthened the firm’s position in the attractive footwear market. Sharma reckons the moves increased the medium-term organic growth and margin potential of the business.

And that’s the kind of catalyst I aim to find when choosing investments – something that may drive higher earnings ahead. But on top of that, Coats has been working to improve the efficiency of its operations. And the directors are also focused on bearing down on costs.

Sharma is enthusiastic about the company’s future. He said Coats is well-positioned in its markets with a focus on growing brands. And there’s a pipeline of promising products to keep the pot boiling with growth. So Sharma is “excited” about the firm’s expansion and profit margin opportunities over the medium term.

However, it’s worth noting the stock has made zero overall progress for more than five years. And that could happen into the future if the company’s growth plans stall because of operational challenges.

Nevertheless, City analysts expect earnings to grow by around 5% this year and 20% in 2024. And with the share price near 77p, the forward-looking earnings multiple for next year is around nine. And I see that valuation as fair.

Turning itself around

Meanwhile, the second stock on my list is PZ Cussons (LSE: PZC), the fast-moving consumer goods supplier. The company delivered a steady set of half-year results in February, despite the ongoing challenging general economic environment.

Chief executive Jonathan Myers said the company has more work to do with its transformation programme.  And there are some near-term headwinds to navigate in some of firm’s markets. But the directors are “confident” about the opportunities ahead. And the ongoing plan is to build a higher growth, higher margin, simpler and more sustainable business.

City analysts predict a 17% uplift in earnings in 2024 after a decline of about 10% in 2023. And set against those expectations, the forward-looking earnings multiple is running just below 14 with today’s share price near 183p.

That valuation looks fair to me. Although it’s worth being aware that the business has a patchy multi-year earnings record. And earnings may not grow as expected if conditions remain tough.

However, there’s a decent-looking dividend yielding well above 3% to keep shareholders company while they are waiting for growth to materialise.

The post 2 top FTSE 250 stocks on my ‘best shares to buy now’ list appeared first on The Motley Fool UK.

And that’s because a company capable of growing its dividend will often have increasing revenues, earnings, and cash flow as well. And those conditions can lead to a rising share price on top of expanding shareholder income.

For example, I like the look of Coats (LSE: COA), the industrial thread and footwear component manufacturer.

In November 2022, the company delivered a third-quarter trading update that was “in line with full year expectations”. Organic revenue grew by 6% in the quarter and overall revenue rose by 14% up to the three-quarter point of the year.

We’ll find out more about recent progress with the full-year report due on 2 March. But City analysts have pencilled in an uplift in earnings for 2022 in excess of 20%. And they expect a further rise of just over 6% this year.

Cyclically sensitive

However, the business saw its earnings dip in the pandemic year of 2020. And that suggests vulnerability to the effects of economic cycles. But since then earnings have recovered well. And I’m optimistic the company has the potential to grow more in the years ahead.

Meanwhile, with the share price around 73p, the forward-looking earnings multiple is running near 10.5 for 2023. And the anticipated dividend yield is around 2.8%. 

But the dividend is forecast to rise by 19% in 2023. And the compound annual growth rate of the dividend is running at 20%. So, despite the risks, I see that as attractive.

And I’m also keen on Hikma Pharmaceuticals (LSE: HIK), the company dealing with generic, branded and in-licensed pharmaceuticals products.

On 3 November last year, the directors reported “strong momentum in Injectables and Branded”. However, the Generics category has been suffering challenges. The company has been experiencing “low double-digit” price erosion and “mid-single-digit” volume shrinkage in its US generics business. But the directors reckon cost and efficiency improvements are helping the business to maintain “a healthy core operating margin in the mid-teens”.

Overall growth in earnings

Meanwhile, City analysts expect overall earnings to increase by around 13% this year. And my hope is that further growth will arrive in the years ahead. Although there is a risk that the problems with the firm’s Generics category may escalate. And there’s also a fair pile of debt to keep an eye on with this company.

Nevertheless, I’d be tempted to buy some of the shares now and collect the dividend while I’m waiting for further operational progress. And with the share price near 1,699p, the forward-looking yield for 2023 is running near 2.8%. That’s not the highest yield in the world. But the compound annual growth rate of the dividend has been running near 11%. And that’s strikes me as potential worth having in my portfolio.

The post 2 UK dividend stocks I’d buy today appeared first on The Motley Fool UK.

I used to think this goal wouldn’t be achievable with a penny stock, as these are considered more risky, unstable, and just for short-term trading. I instead used to focus on larger companies, believing their size would make them more stable and safe.

However, the reality of penny stocks is very different. There are a number of shares trading at less than £1 on the FTSE 100 and FTSE 350. This means that I can find good longer-term holdings that are reasonably sized and traded on the main exchange while also technically being a penny stock.

For my long-term investment portfolio, I’m looking for companies that can grow consistently for many years, while paying a dividend. I don’t want a company that can boost its earnings dramatically in one year and then struggle in subsequent years. I want high-quality companies that give me enough confidence to leave them alone. These should prevent fear that my investment is at significant risk.

A new opportunity

A prime example of what I am after is Coats Group (LSE: COA). The company is a manufacturer of thread and yarn for industrial and consumer use. It currently has a market capitalisation of £1bn, much larger than I would previously associated with a penny stock, and is a constituent of the FTSE 350 index.

The company has experienced somewhat varied share price performance over the years, falling almost 10% in 2020, followed by a slight recovery in 2021. However, it is now down 6.8% in 2022 and has a price-to-earnings (P/E) ratio of just over 10. The P/E ratio is forecast to fall to just 9.2 in 2023.

Solid fundamentals

Despite this, the company has a set of solid underlying fundamentals. It has reasonable profit margins, significant earnings efficiency on capital, and above-average forecasts. Analysts forecast turnover to grow by 9.4% next year, considerably above its three-year average of 2.1%.

The company is also currently paying a dividend yield of 2.9%, which is expected to hit 3.1% next year. Furthermore, this dividend has been paid consistently for the last six years and has grown for the previous two. It also has a dividend cover of 3.2, indicating that the current yield can be comfortably covered by earnings per share (EPS). This cover is forecast to reach 3.5 times next year.

However, it’s important to note a few underlying issues with the company, such as the debt level. This is over 30% of market capitalisation and is above the three-year average of 25.1%. Additionally, free cash flow conversion is lower than I typically like, at under 60% of EPS.

Nonetheless, this is a prime example of a penny stock that I think can make a great long-term investment opportunity for my portfolio. I plan to buy Coats Group when I have the necessary funds.

The post A penny stock I’d add to my long-term portfolio appeared first on The Motley Fool UK.

With this in mind, here are two shares trading below £1 that I’d be willing to buy while the chips are still down and before markets truly begin rallying.

Coats

Industrial thread company Coats (LSE: COA) doesn’t exactly get the pulse racing but it’s a world leader at what it does. And despite the tough economic times we’re in, business doesn’t appear to be suffering too much either.

Back in May, the company reported a 20% jump in sales growth over the first four months of 2022. Importantly, the company stated that actions taken on pricing and productivity had managed to “offset inflationary pressures in the supply chain“. This has had a knock on effect of supporting margins at both its Apparel & Footwear and Performance Materials divisions. That all sounds encouraging to me and may help to explain why the shares are down just 3% year-to-date.

Like all businesses, Coats is remaining “vigilant of potential macro-economic conditions“. And, yes, there’s always a chance that this baby could get chucked out with the bathwater. That said, I think the shares already look good value with a price-to-earnings (P/E) ratio of 11.

Coats also has PEG (price/earnings-to-growth) ratio of just 0.6. While there can be no guarantees when it comes to investing in anything, this suggests to me I’d be getting a good deal based on the potential growth that lies ahead.

At least some of the later may come from the company’s latest addition. Yesterday, it was announced that Coats will acquire global heel counters and insoles supplier Texon. Earnings accretive from the off, this addition should “deliver attractive high single digit growth in a fragmented market” and strengthen the company’s presence in the footwear/ath-leisure space.

There’s also an extremely secure-looking 2.6% dividend yield for good measure.

Tritax Eurobox

A second penny stock I’d buy today is one I’ve had an eye on for quite some time now. Tritax Eurobox (LSE: BOXE) is the lesser-known sibling of £3.5bn cap, UK-focused Tritax Big Box. Like its bigger brother, the former specialises in developing and managing logistics assets for customers.

Eurobox shares are down over 20% year-to-date, no doubt influenced by concerns of rising inflation and lower spending. The latter means potentially reduced earnings for the company’s clients. However, I suspect this will prove a temporary blip. Simply put, the ongoing migration of consumers online means warehouses of the sort that Eurobox provides will be in growing demand.

One snag with Eurobox shares is that they still look expensive, at least initially. A P/E of almost 24 looks pretty steep considering the economic headwinds. However, the company also has a PEG of just over one. So, again, I might actually be getting a decent amount of bang for my buck.

Being a real estate investment trust (REIT) means there’s a passive income stream on offer too. A yield of 5.5% as I type looks like adequate compensation for being asked to wait for a recovery.

The post 2 penny stocks I’d buy before the market recovers appeared first on The Motley Fool UK.

Thread manufacturer

As a quick introduction, Coats is a leading thread manufacturer for industrial and consumer use. It creates and sells thread, knitting yarns, and other related products such as zips, used in the apparel and footwear industry. Coats currently has a sales presence in over 100 countries throughout the world.

It is worth remembering a penny stock is one that trades for less than £1. So what’s happening with Coats shares currently? As I write, they’re trading for 66p, which is the same as at this time last year. The shares have pulled back since the turn of the year, by 8% from 72p to current levels. I believe this is due to macroeconomic and geopolitical headwinds.

To buy or not to buy

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

FOR: Coats has a long history of trading, an impressive growth story to date, and is a leading business in its respective industry too. It also has a good track record of performance. I am aware that past performance is not a guarantee of the future, however. Looking back, it had grown revenue and profit for two years before the pandemic struck in 2020. It bounced back in 2021 and levels exceeded pre-pandemic trading.

AGAINST: Macroeconomic headwinds could have an impact on Coats’ performance and returns. Soaring inflation, the rising cost of living, and a global supply chain crisis could impact it. Rising costs could impact profit levels, which in turn could affect overall performance and shareholder returns. The supply chain crisis could affect its worldwide operations, in turn, affecting sales and performance.

FOR: At current levels, Coats shares look decent value for money on a price-to-earnings ratio of 12. Furthermore, the shares would boost my passive income stream through dividend payments. Its current dividend yield stands at 2.5%. This is higher than the FTSE 250 average of just less than 2%. I am aware that dividends can be cancelled at any time at the discretion of the business, however.

AGAINST: A shorter-term risk to consider is demand for Coats’ products as macroeconomic issues have caused a cost-of-living crisis here in the UK and soaring inflation in other countries. There may be less demand for apparel and footwear. This could result in Coats’ industrial customers ordering less product, which could affect performance and returns.

A penny stock I’d buy

I think Coats is a great business with an excellent track record to boot. The shares are trading at a decent price and also pay a dividend. Its worldwide presence fills me with confidence that it can continue to grow and provide consistent returns. I would add Coats shares to my holdings for returns and growth.

The post Should I buy this global manufacturing penny stock? appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

BAE Systems 

What it does: BAE Systems is one of the world’s leading defence companies and a major supplier to UK and US armed forces.  

By Royston Wild. Defence giant BAE Systems (LSE: BA) is the best-performing FTSE 100 share over the past six months at the time of writing. 

In fact, it’s risen around 40% in value in the year to date. And more recently its share price has remained rock-solid whilst other UK shares have toiled in this new bear market. 

I think the Footsie firm remains an ideal growth stock for me to buy today. Soaring inflation and growing recessionary risks pose a threat to more cyclical stocks. Defence stocks like BAE Systems, on the other hand, can expect trading conditions to remain robust in the near term, meaning investor selling should be kept to a minimum. 

Government defence spending is something that remains broadly resistant to wider economic conditions. War is a constant of history and countries have to be prepared to defend themselves at a moment’s notice. 

This explains why City analysts think BAE Systems’ annual earnings will rise 7% in both 2022 and 2023. This is despite the threat that supply chain problems pose to its operations. 

Royston Wild does not own shares in BAE Systems. 

Experian

What it does: Experian provides credit data to lenders to allow them to assess the creditworthiness of potential borrowers.

By Stephen Wright. I’m keeping things simple with my top UK growth share for July. 

In my view, a good growth stock is one that grows. Specifically, it grows its earnings and then uses those earnings to generate more earnings. This is exactly what Experian (LSE:EXPN) does. 

The company’s strong growth is protected by a high barrier to entry. Experian has a huge database of credit information that it bases its credit scores on, and this would be difficult for a smaller competitor to emulate.

Furthermore, most mortgages require a tri-merge report. Experian’s credit report is part of this, which makes me think that the business will continue to do well going forward.

I’m impressed by the company’s growth and I think that shares trade at a reasonable price at the moment. As such, I’m looking at adding to my investment in Experian stock in July.

Stephen Wright owns shares in Experian.

Coats

What it does: Coats is the world’s leading industrial thread manufacturer. It operates in sectors including fashion, energy and telecoms.

By Roland Head. Thread maker Coats (LSE: COA) is a business that many investors have never heard of, even though we probably all use its products.

This British business has been trading for more than 250 years and operates in 50 countries, with annual sales over $1.5bn.

Analysts expect Coats’ earnings to rise by 13% this year and by 17% in 2022. Despite this positive outlook, the shares currently trade on just 10 times forecast earnings. I reckon that’s too cheap for a business which generated a 21% return on equity last year.

I admit that Coats has disappointed the market before. Demand for some of the company’s products could also fall in a recession.

However, I think the diversity of Coats’ customers should provide protection against localised problems. I’m also impressed by the changes being put in place by CEO Rajiv Sharma. I expect strong growth over the next few years.

Roland Head owns shares in Coats.

JD Sports Fashion

What it does: JD Sports Fashion is a retailer of athletic footwear and athleisure clothing that operates globally.

By Edward Sheldon, CFA. Shares in JD Sports Fashion (LSE: JD) have taken a huge hit in 2022, and I think this has presented me with a great opportunity to buy the growth stock in July.

JD’s full-year FY2022 results, posted in June, were very encouraging to my mind. For the 52 weeks ended 29 January 2022, revenue came in at £8.56bn, up 39% year on year. Meanwhile, adjusted earnings per share (EPS) jumped to 12.8p versus 6.4p a year earlier.

Looking ahead, I’m not expecting growth to continue at this pace. However, in the long run, I expect demand for casual attire to boost revenues and profits significantly.

One risk to consider here is a pullback in consumer spending due to the cost-of-living crisis. This could hit sales. However, with the stock now trading on a forward-looking P/E ratio of under 10, I think a lot of this risk is priced into the stock already.

Edward Sheldon has no position in JD Sports.

Future

What it does: Future is a massive media conglomerate serving digital media on a variety of topics to a global audience of over 300 million people.

By  Zaven Boyrazian. Investing in a media publishing house may sound old fashioned. But it’s proven to be a lucrative move for shareholders of Future (LSE:FUTR). The company is one of the largest media groups in the world, with over 250 websites under its umbrella, including TechRadar, Country Life, and its recently acquired Who What Wear. And over the last five years, the stock is up 700%!

Revenue is primarily generated through advertising and subscriptions. But with more service platforms like GoCompare emerging in its brand portfolio, the company has begun earning considerable income through affiliate fees.

Despite delivering high-double digit growth so far this year, shares have since taken quite a tumble thanks to investor sentiment waning. There are undoubtedly risks surrounding management’s primarily acquisition-driven approach. However, with an excellent track record, I can’t help but see this slump as a buying opportunity for my investment portfolio.

Zaven Boyrazian does not own shares in Future.

Molten Ventures

What it does: Molten Ventures is a UK-based tech-focused venture capital firm with a track record of backing now-listed businesses from very early stages.

By Andrew Woods. Molten Ventures (LSE:GROW) performed well during the pandemic. For the year ended March, between 2021 and 2022, pre-tax profit grew from £267m to £325m. The value of the firm’s gross portfolio also rose from £984m to £1.53bn over the same period.

The company’s most exciting performance, however, is in its earnings-per-share (EPS) growth. Between 2018 and 2022, EPS rose from 89p per share to 200p. By my calculation, this means the firm had a compound annual EPS growth rate of 17.6%. While past performance is not necessarily indicative of future performance, this growth rate is extremely attractive.

The company’s most recent net asset value (NAV) was 937p per share in March. While this is now a few months old, it’s clear that the current share price of 460p is a significant discount. Despite this, the broader economic environment has hit tech stocks particularly hard. There may be a further slide as inflation increases and interest rates continue to rise.

Andrew Woods does not own shares in Molten Ventures.

Renalytix

What it does: Renalytix develops and sells medical devices that can diagnose risk indicators for kidney disease.

By Christopher Ruane. I own shares in Renalytix (LSE:RENX) and so far it has been an absolute dog! The shares have lost 85% of their value in the past year alone. Definitely there are still risks here, such as the substantial costs required to sell the company’s system into more healthcare providers.

But I also see a potentially fantastic opportunity if things go well. There is clinical evidence that the technology can help improve diagnostic outcomes. A presentation this month revealed its positive impact at a leading New York healthcare provider.

Kidney disease is the direct cause of over a million deaths globally each year. If Renalytix can sell its innovative, proven system into more healthcare groups, the scalability of its business model could generate higher revenues without adding costs at the same speed. In the long term I remain optimistic about the outlook, but recognise the risks involved.

Christopher Ruane owns shares in Renalytix.

Spirax-Sarco Engineering

What it does: Sprirax-Sarco Engineering is a UK-based industrial engineering company focused on thermal energy management

By Paul Summers: Cheltenham-based Sprirax-Sarco Engineering (LSE: SPX) is a high-quality company I’ve been monitoring for a while now. A world leader at what it does, the FTSE 100 member has long generated high margins and returns on the capital it invests. It’s these hallmarks that have been found to reward growth investors like me handsomely over time.

The only problem with all this is that the stock has always looked extremely expensive. Until now, that is. A 40% slide in the share price in 2022 leaves Spirax trading at almost 28 times earnings. Granted, that’s still not cheap. However, the idea of beginning to build a position here for the long term now looks far more palatable. 

There’s always a chance things could get worse before they get better if we get a recession. However, high customer loyalty should mean the pain should be temporary.

Paul Summers does not own shares in Spirax-Sarco Engineering

Carnival

What it does: Carnival operates a list of renowned cruise line brands. It sells deals and cruise packages to popular destinations.

By John Choong. Carnival (LSE:CCL) was close to hitting a five-year low in June, but positive guidance provided in its most recent trading update sent its share price rocketing by more than 10%. While this is minuscule on the wider scale of things, there are reasons to be optimistic about a potential recovery.

Despite the firm missing analysts’ estimates on earnings per share, revenue and room occupancy rate, revenue grew by almost 50%. More importantly, I was impressed with the company’s future bookings. The figure came in nearly double of Q1 2022, marking its best figure since the beginning of the pandemic. This is something to cheer for, because future bookings bring in the much-needed cash Carnival requires to return to profitability.

Provided that travel tailwinds continue to persist, Carnival could pull off a monumental recovery, pay off its debt gradually, and even achieve positive free cash flow soon. As such, grabbing shares at the current price could be a steal for years to come.

John Choong has no position in Carnival

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Looking good

The Coats Group (LSE: COA) share price recently closed at its most expensive since July 2019 before profit taking set in. Yet despite these gains the clothing material manufacturer still looks exceptionally cheap on paper.

Today it trades on a forward price-to-earnings growth (PEG) ratio of 0.9. This is just below the benchmark of one that suggests a UK share could be undervalued.

I think Coats Group has a very bright future. As one of the world’s leading manufacturers of threads, zips, yarns, and trims it will play a critical role in clothing a rapidly-growing world population.

Furthermore, Coats Group’s pan-global operation also leaves it well placed to profit from soaring consumer spending levels in emerging markets. I’d buy the penny stock even though the cost of living crisis clouds its sales outlook in the nearer term.

Sports star

Science in Sport’s (LSE: SIS) share price has plummeted in recent sessions. The sports nutrition specialist recently closed at one-year lows following a frosty reception to its latest financials.

It’s no shock as to why investors headed to the exits. SIS’ pre-tax losses swelled to £5.3m in 2021, it said, caused by “investment in technology and data science” and share-based bonus payments to employees. This was up considerably from £2.3m the year before.

I’ve been weighing up whether SIS’ plunging share price represents an attractive dip buying opportunity. And I think the answer is yes. I think it’s a great way to capitalise on the rapidly growing sports nutrition market. Last week SIS said that it expected revenues in March to set a new monthly record.

Science in Sport has excellent brand recognition through its own-branded and PhD Nutrition–labelled products. It has also invested heavily in technology to boost online sales.

FInally, SIS has spent huge sums in the supply chain to eventually help it accommodate £200m worth of yearly sales. The firm reported revenues of £62.5m in 2021.

Sure, the business operates in a highly-competitive industry. But I think its excellent momentum in a fast-growing industry merits a close look.

Another cheap penny stock to buy

Building materials supplier Breedon Group (LSE: BREE) hasn’t suffered the sort of shocking sell-off as SIS. But recent share price falls still leave it looking mighty cheap.

For 2022 Breedon trades on a forward PEG ratio of 0.5. I think it could prove to be a brilliant penny stock to buy as construction activity in the UK grows. More specifically I expect it to thrive from healthy infrastructure investment and a step-up in house building.

Breedon supplies bricks, tiles, aggregates, concrete, and a wide range of other essential building products. Profits might suffer if broader economic conditions deteriorate. However, I think this risk is baked into the company’s dirt-cheap share price. I think its a great growth stock for me to buy today.

The post 3 of the best penny stocks to buy after recent falls! appeared first on The Motley Fool UK.