Yet, despite these robust gains, many penny shares still look brilliantly cheap at current prices. Here are three I think demand particularly serious consideration today.

Alternative Income REIT

Alternative Income REIT (LSE:AIRE) is an outlier in the broader penny stock complex. Rather than growth, its focus is on delivering strong and sustainable passive income to investors.

Its exceptional value still warrants a close look from small-cap investors, though. The real estate investment trust (REIT) trades at a 15% discount to its net asset value (NAV) per share.

Continuing the dividend income theme, the trust’s forward dividend yield is an enormous 8.6%.

Alternative Income’s share price has flatlined in 2025 due to growing pessimism over future interest rate cuts. Higher rates create more pressure given the REIT’s high debt levels.

Yet, I think this is more than baked into the trust’s low valuation. I like its diversification across sectors including retail, residential, and healthcare helps reduce risk. It also has tenants tied down on long contracts, further insulating it against tough economic conditions.

As of June, the REIT’s leases had an average remaining term of 15.6 years to the earliest break and expiry date.

Everyman Media Group

Cinema operator Everyman Media Group (LSE:EMAN) has dropped 22% in value in the year to date. This reflects concerns over UK consumer spending power, combined with particular uncertainty over the cinema industry as viewing habits change.

These worries merit serious attention, but so does the showstopping value that Everyman shares now offer. The leisure giant trades on an enterprise value (EV) to revenues ratio of just 0.4. Meanwhile, its EV to EBITDA ratio is a modest 2.8 times.

I think this penny share’s well placed to weather sector problems and grow long-term profits. It offers more than the bog-standard multiplex cinema, with its sites also incorporating bars and restaurants to encourage people from their sofas. This gives it added scope to grow revenues and sustain itself in the streaming age.

Agronomics

Agronomics (LSE:ANIC) has been one of the best-performing penny shares in the year to date. The company invests in more than 20 early-stage businesses that make food and clothing from animal and plant cells.

It’s risen almost two-thirds in value so far in 2025. And yet it still trades at a 57% discount to its NAV per share.

Investing in smaller companies allows Agronomics to seize early mover opportunities. Major holdings here include lab-grown chicken manufacturer SuperMeat and plant-based meat producer LiveKindly.

On the downside, this also increases risk. Acquisitions can throw up nasty surprises that erode shareholder value. However, I think the potential long-term rewards of its strategy may outweigh these dangers. Agronomics reckons its market could be worth more than £200bn by 2040 as phenomena like climate change and ethical awareness drive growth.

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Investors can manage the danger they take on, however, by snapping up penny shares that command low valuations. This pricing cushion can offer protection from share price drops if the company’s growth plan doesn’t pan out as expected.

With this in mind, here are two top shares to consider this month.

Screen idol

The threat to cinema operators is severe as streaming companies like Netflix change the way we consume movies. Yet Everyman Media (LSE:EMAN) continues performing strongly, even as pressure on consumers’ spending power persists.

Everyman — which operates 48 theatres across the country — isn’t your bog-standard multiplex owner. It offers a well-rounded experience, showing niche, independent, and foreign films alongside the usual blockbusters. What’s more, patrons can grab a drink at its bars and go for a meal at its in-house restaurants, too, offering everything people need for a good night out.

This value-added strategy is paying off handsomely. In the 26 weeks to 3 July, group revenues leapt 21%, to £56.5m. Admissions increased 15% from the same 2024 period; ticket prices rose 6%; and food and beverage spend per head was up 5.9%.

Consequently, group EBITDA shot 33% higher over the period, to £8.2m.

Everyman is confident its ‘whole experience’ model will continue delivering the goods, and is eyeing further expansion to its estate — it “plans to open two additional venues in 2026“, it’s said, and enjoys “a strong pipeline of future developments” too.

Naturally, the ongoing streaming revolution will remain a threat to businesses like Everyman for the foreseeable future. But in the case of this penny stock, my view is the danger is more than baked into the cheapness of its shares.

The screen idol’s enterprise value (EV) to EBITDA (earnings before interest, tax, depreciation, and amortisation) ratio is just 2.8 times. Any reading below 10 suggests a share could be undervalued.

Property for pennies

The second top penny share to consider is Schroder European Real Estate Investment Trust (LSE:SERE). Unlike many small caps, it offers the possibility of a large passive income as well as growth, which reflects its classification as a REIT.

Under sector rules, at least 90% of rental-related profits must be paid out in dividends each year.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

That’s all well and good on paper. But with eurozone economies struggling for growth and inflationary pressures persisting, the trust’s returns could theoretically disappoint in the near term.

Such dangers wouldn’t necessarily put me off if I had cash to invest, however. Over the long term, the company — which owns retail, office, and industrial assets, among others — has the potential to deliver spectacular earnings growth. Its focus on ‘winning’ cities with strong economies, robust infrastructure, and attractive environments (like Paris and Berlin) gives it an edge achieving impressive rental income growth.

And, today, the trust offers excellent all-round value. It trades at an 31.8% discount to its net asset value (NAV) per share. As for those dividends, its forward yield is an enormous 7.6%.

The post 2 cheap penny stocks for savvy investors to consider in August appeared first on The Motley Fool UK.

On the downside, prices of these small-cap companies can be highly volatile. Heavy selling of their shares can ramp up when industry or economic conditions worsen and fears over their survival increase.

But when investors get it right, buying young companies when they trade below £1 can deliver stunning — and in some cases, life-changing — returns. This is because these shares can have much better growth (and therefore share price) potential than the broader stock market.

Everyman Cinema Group (LSE:EMAN) is a company I think has significant long-term investment appeal. And following recent share price weakness, I believe it’s worth serious consideration from clever investors.

Industry pressure

Investing in cinema stocks has been a risky strategy since the end of Covid-19. Changes to viewing habits and the movie studio model means box office takings remain some way off their pre-pandemic highs.

Weak bookings over the US Memorial Day weekend underlined the scale of the problem. Despite high-profile releases Furiosa: A Mad Max Saga and Garfield, the American box office endured its worst performance since 1995.

So why on earth would I consider buying Everyman shares?

Put briefly, it offers more than the bog standard film theatre, which means it’s more resilient to the state of the broader cinema industry.

Flying high

The AIM-listed firm operates 44 venues across the UK, from which it runs the latest blockbusters, silver screen classics, independent movies and specal film events. Patrons can also grab some food in its restaurants and have a drink delivered to their seat.

This has proved to be a winning formula. As Everyman explains: “With a focus on hospitality, Everyman is re-defining how film is being consumed and is therefore outperforming the wider cinema market”.

Latest financials in April reveal how its business model’s thriving. Admissions jumped 9.5% over the course of 2023, to 3.75m, while the average ticket price rose 3.2% to £11.65.

With food and beverage spend per head soaring — up 10.2% year on year to £10.29 — sales jumped 15.3% from 2022 levels, to £90.9m.

Growth potential

Everyman’s formidable results fly in the face of the broader cinema industry’s problems. And the business — which grew its market share 30 basis points last year, to 4.8% — believes it can continue making strong progress.

Last year it completed four organic cinema openings during the year. It also acquired two Tivoli cinemas in December after previous owner Empire Cinemas went into administration.

Consumers in the UK are feeling the pinch, and Everyman’s sales might cool if economic conditions remain tough. But I believe the eventual rewards this penny stock could deliver still make it a top buy.

And especially at current prices too.

A bargain penny stock

Losses are narrowing sharply following the end of the pandemic. But the company isn’t expected to punch a profit until 2025. This means a price-to-earnings (P/E) ratio isn’t available.

However, Everyman’s price-to-sales (P/S) ratio can be used to gauge its value. And today, this sits at just 0.5, comfortably below the value benchmark of 1.

All things considered, I think value investors should give this overperforming penny stock a close look.

The post A dirt cheap penny stock for investors to consider in June! appeared first on The Motley Fool UK.

Crowd-pleasing numbers

This penny stock may be down 27% this year, but investors shouldn’t rule out its potential just yet. Canaccord Genuity Group has a price target of £2 for Everyman shares. This indicates a potential gain of over 200% if the cinema chain continues to grow rapidly.

Last month, Everyman enjoyed record weekly admissions fueled by smash hits like Barbie and Oppenheimer. This saw its July revenue jump almost 50% to £10.6m from £7.1m. But perhaps more encouragingly, its EBITDA doubled to £2.6m.

With more crowd-pleasing films lined up for the rest of 2023, revenue and profits should continue to grow. The company is also rapidly expanding its footprint, as it’s on track to open new upmarket cinemas this year and the next. As such, this penny stock is still in its early stages of growth.

Blockbuster offerings

Some sceptics are of the opinion that streaming will kill cinemas, which seems reasonable enough, but I disagree. Rather, I hold the view that after years cooped up at home, people crave communal, larger-than-life viewing again — and going out for a movie is an experience streaming can’t replicate.

This is even more true for an experience like Everyman. Its luxurious theatres feature spacious leather seats, premium food, and bars. This creates an exceptional viewing experience versus stale mega-chains — and its attendance last month proves the cinema’s resilience.

With the right slate, people are still flocking to cinemas for an immersive escape. Thus, the penny stock’s smart pivot towards premium amenities and services to differentiate itself from Netflix on the couch has been working out well thus far.

Its pricing power also appears robust due to its more affluent customer base. Despite raising ticket prices, demand doesn’t seem to be dying down. As a result, profitability has rebounded quickly after lockdowns eased.

Everyman’s small size provides nimbleness too. The firm often spots growth opportunities its competitors overlook. This has been the case with its improved ancillary offerings through an extensive food and drinks menu.

Cinematic gains?

Management says they plan to grow their estate over the long term. With only 34 venues now, this still leaves an enormous runway for the group to grow, especially when compared to the hundreds of chains Cineworld currently has. Therefore, this penny stock deserves a higher multiple with so much potential.

Balance sheet worries are certainly a concern, considering the relatively hefty amount of debt Everyman carries. Nonetheless, investors may find some relief in the fact that it recently announced a new three-year loan facility of £35m to replace its existing credit arrangements.

For investors like me, buying growth stocks could lead to life-changing returns. At 60p per share today, I’d be willing to invest a reasonable £6,000 in Everyman today for the potential to grow that to £14,000. This penny stock offers a front-row seat to cinematic gains, especially if it hits its price target.

The post I’d buy 10,000 shares of this growing penny stock to quadruple my money! appeared first on The Motley Fool UK.

That said, small-cap shares like these also have considerable growth potential. This gives me as an investor the possibility to supercharge my long-term returns.

Opening a small position in penny stocks could be a good plan for me right now. Everyman Media Group (LSE:EMAN) is one I’m considering buying for my UK shares portfolio next month.

Signs of life

Buying shares in cinema chains like Everyman may appear high risk today. Demand at the box office remains uncertain as the cost-of-living crisis endures. The threat from streaming platforms like Netflix and Amazon’s Prime is also considerable following Covid-19.

However, blockbuster ticket sales during the so-called Barbenheimer weekend are encouraging me to buy Everyman shares. They suggest the public’s long love affair with the big screen still has plenty of life left in it yet.

The twin releases of Barbie and Oppenheimer in recent days have delivered analyst-busting ticket sales. Major chain Vue says it has enjoyed its best weekend since 2019, and chief executive Tim Richards commented that Barbie has “a good chance of getting into the Top 10 highest grossing films of all time”.

He added that “it is an incredibly exciting moment for the industry, and we expect this trend to continue for the coming weeks”.

Everyman’s share price has fallen 47% over the past year amid lingering industry concerns. This weekend’s strong performance suggests now could be a time to buy the penny stock as a recovery play.

Why I’d buy this penny stock

I think investing in this penny stock could be a better idea than Cineworld or any other UK or US cinema operator. Its position at the premium end of the market may better protect it from sales weakness as the cost-of-living crisis continues.

Admissions in 2022 soared to 3.4m from 2m the year before. This was despite a 29p increase in the average price of a ticket (to £11.29). Meanwhile, the amount spent on food and beverages per head increased to £9.34 from £9.07 previously.

Everyman’s broader product offering also helps it combat the threat of streaming platforms better than standard operators like Cineworld. Its cinemas also offer a place for people to grab a meal and a drink before or after the movie. This gives people extra reason to leave the sofa.

I think earnings here could rise strongly as the company expands. It’s on course to open six new cinemas during 2023 alone, taking its estate to a total of 44 sites. The business plans to continue rapidly building scale too and has “an exciting pipeline of further opportunities for 2024 and 2025”, it said in April.

On balance, I believe Everyman could be one of the best penny stocks to buy right now.

The post An unloved penny stock I’m considering buying with £2,000 in August! appeared first on The Motley Fool UK.

Here’s why I’m looking to open a position in the company myself when I have spare cash to invest.

Box office bombs

Buying shares in cinema operators is riskier today than in years gone by. The problems of Cineworld — which was finally brought down by disappointing post-pandemic ticket sales — illustrate the challenge that cinemas have in attracting viewers through their doors.

A steady stream of sequels, reboots and spin-offs of Hollywood blockbusters drove the global box office to record highs before Covid-19. But signs are emerging that these cash cows aren’t the force that they once were.

DC Comics superhero movie The Flash generated poor ticket sales on its release last month. Even Harrison Ford vehicle Indiana Jones and the Dial of Destiny — a titanic Tinseltown franchise and rock-solid banker in previous times — delivered awful box office numbers when it opened at the weekend.

This could be a sign of any one (or even a combination) of several things: the impact of the cost-of-living crisis on ticket sales; intense competition from streaming companies like Netflix and Amazon; even public dissatisfaction with a Hollywood movie system bereft of new ideas.

A premium selection

Whatever the reason(s), this poses a problem for cinema chain Everyman Media Group (LSE:EMAN). However, I still believe this penny stock could prove a brilliant investment right now.

Films are at the heart of what it does. But Everyman’s 38 venues are about more than just catching a flick. Moviegoers can grab a drink at one of its bars or a bite at its restaurants before or after taking their seat.

It therefore provides viewers the chance to have a proper night out without even leaving its premises. This gives it an advantage over mainstream cinema operators who are struggling to pull people off the sofa and away from streaming services.

Everyman also puts on other films and events to get bums on seats. Independent films, special editions of Hollywood favourites, throwback movies, and theatre and music events are all part of its packed roster.

The company’s focus on the premium end of the market gives it an extra advantage too. This makes it is less vulnerable to economic downturns than bog-standard cinema operators like Cineworld are.

Building for growth

Everyman’s strong trading in 2022 illustrates the effectiveness of its business model.

Helped by the end of Covid-19 lockdowns, admission numbers soared to 3.4m last year from 2m in 2021. On top of this, higher ticket prices and increased spending on food and drink per head helped it swing back into profit as revenues soared.

Encouragingly, last year’s stellar result has prompted Everyman to restart its ambitious expansion strategy. This in turn could lay the foundation for robust long-term profits growth. It plans to open six new venues in 2023 and says that it has an “exciting pipeline of further opportunities” beyond this year as well.

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dotDigital Group

Artificial intelligence (AI) is tipped to be the tech growth market that investors pile into. The widescale publicity that OpenAI’s ChatGBT chatbot has recently attracted underlines just how strongly machine learning is grabbing people’s imagination.

Businesses are enthusiastically embracing AI and its potential to boost productivity and bring down costs. In fact, a YouGov survey indicates that 44% of top executives believe machines could perform tasks to a similar or better standard than humans. That’s quite the vote of confidence.

UK share investors have only a limited number of ways to exploit any AI boom. Penny share dotDigital Group (LSE:DOTD) is one London Stock Exchange share that’s attracting my attention today.

dotDigital’s platform improves the way companies do their marketing and engage with their customers. It makes product recommendations to online shoppers based on prior purchases. The tech also creates marketing campaigns and helps firms keep in touch with consumers via e-mail, chatboxes, and other communication methods.

Revenues are rising at a robust rate and increased 9% during the six months to December. As the company invests in product innovation and expands its overseas operations, I think sales could increase strongly over the next decade.

Okay, sales may suffer in the near term as the global economy struggles. Spending on marketing operations is usually one of the first things to go on the chopping block in tough times. But as someone who invests with a long-term view, I think dotDigital shares are highly attractive.

Everyman Media Group

The cost-of-living crisis poses a huge threat to countless UK shares. With food inflation at 45-year highs, people have much less cash to spend on other things. In fact, food prices are rising three times faster than average wage growth in Britain.

Yet there are still some retail and leisure stocks I’d be happy to buy despite these pressures. Cinema chain Everyman Media Group (LSE:EMAN) is one of these.

You see, the amount people are spending on going out remains strong despite mounting strain on consumers’ wallets. ‘Revenge spending’ on leisure activities following Covid-19 lockdowns is high and showing no signs of cooling.

Latest financials from Everyman illustrate this perfectly. Ticket sales soared to 3.4m in 2022 from 2m during the lockdown-affected previous year. And the penny share expects admissions to rise again this year, it said last week.

Everyman has a big advantage over mainstream operators like Cineworld. It offers a wider range of films than the competition and often hosts special events.

The company’s venues also contain bars and restaurants, and they allow watchers to order refreshments straight to their seats. So for those looking for a great experience outside the house it ticks a lot of boxes.

As Everyman boosts its estate I think earnings could rise sharply over the coming decade. It plans to open six new venues in 2023 alone.

The post 2 top penny shares I’d buy to hold until 2030! appeared first on The Motley Fool UK.

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Anglo Asian Mining 

What it does: Anglo Asian Mining is an AIM-listed mining share whose precious and base metals projects span the globe. 

By Royston Wild. Commodities are popular wealth preservers with investors during uncertain times. And by extension so are producers of raw materials like metals. This is why I believe Anglo Asian Mining (LSE:AAZ) could be a top investment for April. 

This UK mining share produces gold, silver and copper from its assets in Azerbaijan. It also owns a stake in Libero Copper & Gold Corporation, a business with precious and industrial metal assets in The Americas. 

The prices of Anglo Asian’s metals could continue climbing if worries about high inflation and a banking sector crisis persist. They could also keep rising if factory data from commodities glutton China impresses. Manufacturing PMI readings from the country soared to their highest in more than a decade recently. 

I think this small-cap stock is especially attractive for income investors. It carries a meaty 5.9% dividend yield at current prices.

Royston Wild does not own shares in Anglo Asian Mining. 

Atlantic Lithium

What it does: Atlantic Lithium is an Australia-based lithium exploration company, operating in West Africa.

By Alan Oscroft. Lithium for batteries is in great demand from the electric vehicle industry. But demand for shares in lithium explorers has gone off the boil.

Atlantic Lithium (LSE:ALL) has always been hard to value, as it’s not making any profit yet. But nearly all of the share price gains of 2021 and 2022 have now been reversed.

I suspect that’s more likely to be due to a turn away from growth stocks than anything else.

Forecasts suggest relatively small losses for this year and next. But there’s a profit down for 2025, putting the shares on a price-to-earnings (P/E) ratio of under six.

The company had cash of AU$19.1m at 31 December. So how long that will last and what new cash might be needed before profitability is reached looks like the big risk.

But I think I’m seeing a buying opportunity in this small-cap stock.

Alan Oscroft does not own Atlantic Lithium shares.

Bioventix

What it does: Bioventix is a UK biotech firm developing and supplying high-affinity diagnostic antibodies for the medical industry.

By Zaven Boyrazian. Bioventix (LSE:BVXP) is a biotech firm specialising in sheep monoclonal antibodies. These antibodies serve a pivotal role in human medical diagnostics, and are most commonly used on blood testing machines in hospitals and research labs.

Despite being a critical supplier to the healthcare sector, the firm took quite a stumble during the pandemic. With the industry primarily focused on tackling Covid-19, blood diagnostic antibodies weren’t exactly in high demand.

With Covid-19 no longer dominating hospitals, demand for Bioventix’s niche products is back on the rise. And thanks to its antibodies specialising in detecting vitamin D deficiency, pre-tax profits have returned to double-digit growth.

Bioventix looks like it’s back on track. And while trading at a P/E ratio of 25 is certainly not cheap, it may be a justifiable price given the small-cap stock’s long-term potential.

Zaven Boyrazian does not own shares in Bioventix Plc.

Calnex Solutions

What it does: Calnex Solutions is a Scottish company that specialises in testing and measurement services for telecommunication networks.

By Edward Sheldon, CFA. Calnex Solutions’ (LSE: CLX) share price took a big hit recently after the company warned that performance in FY2024 was likely to be below that of FY2023. It noted that in the current macro environment, some customers are taking a more cautious approach to investment decisions.

However, the company also said that it is confident that, as the industry spending cycle normalises, it will see an uplift in orders from the current, more subdued, levels. And looking further out, it said that it remains well placed to capitalise on the underlying long-term growth drivers in the telecoms and cloud computing markets. “We are well-placed to return to a growth trajectory once market confidence returns,” said founder and CEO Tommy Cook.

Given management’s confidence in the long-term growth story, I’m looking at the recent share price weakness here as a buying opportunity. I think it’s only a matter of time until growth picks up and the share price moves higher.

Edward Sheldon owns shares in Calnex Solutions.

Everyman Media Group  

What it does: Everyman Media Group is the owner of the premium cinema chain.  

By Charlie Keough. Everyman Media Group (LSE: EMAN) shares have failed to excite this year, down 15% as I write. Yet despite this, I think the future looks bright for the small-cap stock.  

2022 saw revenues increase by a whopping 62.5% compared to 2021. And while this might be expected given the impact of the pandemic, the 20% jump its latest revenues represents from the pre-pandemic year highlights Everyman’s strong growth.  

Last year also saw the business beat expectations with EBITDA coming in at around £14.5m. On top of this, it managed to maintain its market share with its 38 venues.  

Looking to this year, Everyman is set to open venues in five new locations, including the likes of Durham and Plymouth.  

Consumers tightening their belts may impact the business in the short term. But with a strong pipeline of releases lined up for 2023 alongside the unique service Everyman provides, the stock could present a solid opportunity in April.  

Charlie Keough does not own shares in Everyman Media Group.  

Everyman Media

What it does: Everyman is a premium and luxury chain of cinemas located across the UK.

By John Choong: With the cost-of-living crisis continuing to bite down on consumer spending, many would expect discretionary spending to take a hit. However, Everyman (LSE:EMAN) has bucked the trend with its premium experiences. Cinema goers don’t normally pay more than £10 per ticket, but at Everyman, customers pay upwards of £20 for luxurious and comfortable seats with at-seat service.

This proposition sets this small-cap stock apart from its competitors, as its products are catered towards more affluent spenders. As such, sales have managed to stay robust through difficult times. In fact, they’re expected to continue growing in the medium term as the UK’s fourth-largest cinema chain is anticipated to open another four venues this year. 

Combine the above with resilient retail sales data so far this year and reasonable multiples, and it’s not difficult to see why I’m keen on adding Everyman shares to my portfolio.

John Choong has no position in any of the shares mentioned.

Income & Growth VCT

What it does: Income and Growth is a venture capital trust that owns stakes in a variety of small and medium businesses.

By Christopher Ruane. A weak economy and rising interest rates could make this a challenging time for young businesses.

Some will still do well, though – and spotting them could be lucrative. That is what the fund managers at venture capital trust Income & Growth (LSE: IGV) aim to do. A recent successful example is the trust’s investment in software provider Tharstern. An investment of £1.5m has generated cash proceeds of £4m in under nine years.

Not all picks will be as successful. A difficult economy risks worsening investment results.

But the small-cap stock has a strong track record, and successful investments could help fund future dividends. The current yield is 10.7%. Dividends have moved around from year to year but have often been substantial.

I like the strong income potential and would be happy to buy the shares for my portfolio in April if I had spare cash to invest.

Christopher Ruane does not own shares in Income & Growth VCT.

Pensana 

What it does: Pensana is a rare earth metals company aiming to break China’s monopoly on the processing of the critical minerals. 

By Mark Tovey. Rare earths include a list of 17 chemical elements with strange names but familiar applications. Neodymium, for example, is used in the magnets that make smartphones vibrate. Promethium is needed in pacemakers.  

China is responsible for processing 85% of the world’s supply of rare earths. Outside of China, there are only two rare earth processing plants. That number will soon rise to three, thanks to Pensana’s (LSE:PRE) planned separation facilities in the Humber Freeport.  

For the project, Pensana received an undisclosed sum from the UK government. Western leaders are anxious to free the rare earths supply from China’s stranglehold.  

I plan to buy shares in Pensana, although it will only be a very small proportion of my portfolio. That’s because Pensana has no revenues, putting it at the mercy of capital markets. In addition, its neodymium-praseodymium mine in Angola could be struck by any number of geological or political catastrophes.  

Mark Tovey does not own shares in Pensana. 

Somero Enterprises

What it does: Somero Enterprises designs, assembles, remanufactures, sells, and distributes concrete leveling, contouring, and placing equipment.

By Paul Summers: Shares in laser-guided equipment maker Somero Enterprises (LSE: SOM) have sunk by 25% or so in the last year as the market has fretted over rising interest rates. The concern is that this will cause a recession in construction. Since Somero’s tech helps to lay perfectly flat floors, that makes sense.

As an existing shareholder, however, I’m not worried. In fact, I’m contemplating increasing my position in this high-quality, cash-rich company.

March’s full-year results read just fine to me. Revenue remained steady and profit dipped only slightly due to higher costs. 

This makes the valuation of a little over eight times earnings look like a steal. There’s even a monster 7% forecast dividend yield in the offing while I wait for the share price to recover. 

Although pure speculation on my part, I also wonder if we could see a few takeover bids in the near future.

Paul Summers owns shares in Somero Enterprises

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Kodal Minerals

Purchasing junior mining shares like Kodal Minerals (LSE:KOD) can be perilous for investors. These smaller operators tend to have less financial headroom to weather setbacks at the exploration, project development, and/or production phases.

But I believe this particular penny stock is far less risky following recent funding developments. In January, it sealed a conditional funding package worth around $118m to get its Bougouni lithium project in Mali off the ground.

The deal will provide full financing for the development and start of production at the asset. It will also support a significant exploration and development programme at other West African projects.

I’m attracted to Kodal as an investor because its flagship Bougouni asset has significant long-term potential. It has a mine life of 8.5 years and a current resource estimate of some 21.3m tonnes.

I’m thinking of buying lithium stocks to capitalise on booming demand for electric vehicles (EVs). Demand for the key battery material is tipped to soar as production of cleaner cars ramps up.

The boffins at S&P Global Platts Analytics think 26.8m EVs will be sold in 2030. That’s a huge lift from the 6.3m that rolled off forecourts in 2021. Kodal could be one of the safest ways for investors to make money from this rapidly-growing market following that recent capital injection.

Everyman Media Group

A bright start to 2023 for the UK box office suggests Everyman Media Group (LSE:EMAN) could also be a top stock to buy. Future cinema takings could suffer as the cost-of-living crisis endures. But latest data from the industry is highly encouraging.

The latest Marvel Studios release Ant-Man and The Wasp: Quantumania took an impressive £8.8m at the UK and Ireland box office on its debut last weekend. To put that in perspective, the previous two Ant-Man flicks took £4m and £5m on their debuts respectively.

There is strong pent-up demand for cinema tickets following the pandemic. And a robust slate of blockbuster movies over the next two years could deliver excellent profits for the likes of Everyman.

I like this particular cinema operator because it offers more than just a place to catch the latest mainstream or independent movie. Visitors can also grab a drink at its in-venue bars or a bite to eat in its restaurants.

This superior experience could allow it to see off the threat posed by streaming giants like Netflix and Amazon. It might also see it grab market share from the bog-standard operators like Cineworld and Vue.

Everyman is expanding too to give long-term earnings a shot in the arm. It plans to open five new venues in 2023 alone to take the total on its books to 43.

The post 2 penny stocks I’d buy to hold in my ISA for the next decade! appeared first on The Motley Fool UK.

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Concurrent Technologies

What it does: Concurrent designs, builds, and supplies central processing unit boards, computer inter-connections, and computer systems to a variety of industries, mainly telecoms, aerospace, and defence.

By John Choong. On the back of a terrible year for chip manufacturers, Concurrent Technologies (LSE:CNC) shares could be about to ride the rebound with the rest of the industry. Its bigger peers like TSMC and AMD have signalled a bottom in the decline of chip demand, with growth expected from H2 onwards.

Concurrent’s latest trading update pretty much supports this sentiment. Management reported a record order book worth more than £31m. As such, the board is expecting to see significant revenue growth this year as it plans to increase its production capacity, and get its free cash flow back to positive levels.

Although its current and near-term forward multiples don’t exactly scream a bargain, it’s worth noting that those metrics only have a one-year time horizon. But because I plan to invest over a longer period, I’m looking beyond that. And given its earnings potential, buying the small-cap stock now could present quite a decent upside.

John Choong has no position in any of the shares mentioned.

EKF Diagnostics

What it does: EKF Diagnostics is a leading global medical manufacturer that specialises in point-of-care testing equipment and central laboratory devices.

By Edward Sheldon, CFA. There are a few reasons I’ve chosen EKF Diagnostics (LSE: EKF) here.

One is that the company is expected to generate solid revenue and profit growth this year. For 2023, City analysts expect revenues to climb 8% year on year and net profit to rise nearly 60% year on year.

Another reason is that the healthcare diagnostics industry is relatively recession-proof. EKF’s products are used in hospital and research laboratories, doctor’s offices, and blood banks in more than 100 countries. I’d expect demand for its products to remain stable if economic conditions deteriorate from here.

Of course, as a small-cap stock, EKF Diagnostics could be a volatile investment. I’d expect its share price to fluctuate a fair bit. However, with the stock currently trading well below its all-time highs, I like the risk/reward proposition on offer.

Edward Sheldon has no position in EKF Diagnostics

Everyman Media Group 

What it does: Everyman is the owner of the eponymous UK cinema chain. 

By G A Chester. The share price of Everyman Media Group (LSE: EMAN) is some 35% lower than this time last year. And its market value has halved from its level before the pandemic. 

Yet the company has just reported 2022 revenue over 20% higher than in the pre-pandemic year. Plus EBITDA (earnings before interest, tax, depreciation and amortisation) ahead of market expectations — a recovery taking it back to near its pre-pandemic level. 

This premium cinemas chain ended 2022 with 38 venues. Management told us its “cognisant of the difficult macroeconomic environment and consumer backdrop,” but said performance in the new financial year has been encouraging. And with plans to open a further five venues in 2023, and both the volume and quality of new film releases expected to increase this year, the directors said they “continue to have significant confidence in the future.” A risk here is if this confidence turns out to be over-optimistic, of course. 

G A Chester does not own shares in Everyman Media Group.

Fonix Mobile

What it does: Fonix is a unique consumer-friendly mobile payments business targetting the media, gaming, ticketing, and transport sectors.

By Zaven Boyrazian. As we move toward a cashless society, digital payment companies like Fonix Mobile (LSE:FNX) are riding on impressive tailwinds. The business provides a relatively unique mobile payment solution whereby small transactions can be completed, and the cost added to a user’s mobile phone bill. And it’s proving to be exceptionally popular.

Over 18 million people in the UK actively use Fonix’s payment solution, translating into a five-year average revenue growth rate of 25%, with operating margins steadily expanding.

Worryingly, the small-cap stock’s top 10 merchants are responsible for 85% of Fonix’s gross profits. Needless to say, that’s a fairly large client concentration risk.

But given that the firm hasn’t lost a single merchant from its platform in the last five years, these relationships seem pretty sticky. And given the potentially explosive long-term gains, opening a small position in my portfolio could prove highly lucrative in the long run despite the high risk.

Zaven Boyrazian does not own shares in Fonix Mobile.

hVIVO

What it does: hVIVO is a contract research organisation (CRO) that tests vaccines using human challenge clinical trials.

By Ben McPoland. The Covid pandemic has ushered in a wave of research and development spending focused on infectious and respiratory diseases. One company benefiting from this is hVIVO (LSE: HVO), a world leader in designing and running human challenge clinical trials.

Indeed, the firm conducted the world’s first such trial for the coronavirus back in 2021. These studies involve exposing healthy volunteers to the actual pathogen a vaccine is being tested for by biopharmaceutical companies. Its clients include four of the top 10 global biopharmas. 

Management expects record revenue of £50.6m for 2022, representing 30% growth year on year. That’s with minimum EBITDA margins of 17%. Its order book is bulging, up 65% year on year with contracted revenue reaching £76m by the end of December. 

Yet the small-cap stock is down 55% since reaching 38p back in April 2021. With a market cap of £113m or so, investors can expect share price volatility. 

Ben McPoland owns shares in hVIVO.

Income and Growth VCT

What it does: Income and Growth is a venture capital trust that invests in a range of early stage companies.

By Christopher Ruane. Over the past year, shares in Income and Growth (LSE: VCT) have fallen 17%. I think that makes now an attractive moment for a long-term investor like me to buy the shares, which I would do if I had spare cash to invest.

The trust aims to pay an annual dividend of at least 6p per share. Although dividends are never guaranteed, last year it exceeded the target with an 8p per share payout. That means the shares currently yield over 10%. I find that very attractive, while recognising that the dividend may jump around quite a bit from year to year.

Investing in growing companies at an early stage has helped it fund lucrative shareholder distributions. If the trust’s holdings suffer in the recession, that might hurt earnings. But over the long term, I think exposure to growth stories could help the trust profit – and hopefully pay large dividends.

Christopher Ruane does not own shares in Income & Growth.

Keystone Law Group

What it does: Keystone is a full-service law firm with 400+ lawyers that embraces technology and modern working practices.

By Charlie Carman. Keystone Law Group (LSE:KEYS) is an AIM-listed company, whereas the vast majority of law firms are limited liability partnerships. Accordingly, Keystone offers a rare opportunity for investors to gain legal industry exposure in their portfolios.

The half-year 2023 interim results make for positive reading. The firm delivered revenue of £36.8m, which represents a 9.3% increase over H1 2022.

In addition, operating cash conversion of 101% and the absence of debt bodes well for the dividend. The last interim dividend was 5.2p per share.

The firm also continues to attract talent as experienced lawyers increasingly look for flexible career opportunities beyond the traditional law firm model.

Granted, there’s a risk client legal expenditure could come under pressure in an economic downturn. Nonetheless, Keystone shares have halved in value over the past 12 months, and I’d like to enter a position while I can still buy the shares in this small-cap stock at a bargain price.

Charlie Carman does not own shares in Keystone Law Group. 

Ramsdens Holdings

What it does: Middlesbrough-based Ramsdens Holdings is a diversified financial services provider and retailer.

By Paul Summers. In contrast to most UK stocks, Ramsdens Holdings (LSE: RFX) enjoyed a very good 2022. As I type, the share price is up 25% over the last 12 months. There might be more gains ahead.

Recent trading has been encouraging. Jewellery retail gross profit rose 15% in the three months to December. The pawnbroking book also saw further growth. That’s not surprising in the current climate.

There’s a dividend stream from this small-cap stock, too. Right now, Ramsdens is down to yield 4.4%. This payout is also likely to be easily covered by profit. So, there’s a high probability of it being paid. 

That said, no investment is a sure thing. Any chinks of light in the economy could see existing holders take profit and move on. 

Then again, the valuation of 10 times earnings isn’t exactly excessive. So, as a possible hedge against further economic pain, I reckon Ramsdens remains a tempting option.

Paul Summers has no position in Ramsdens Holdings.

UP Global Sourcing Holdings 

What it does: UP develops and sells branded kitchen and laundry products. Its brands include household names such as Salter, Beldray and Russell Hobbs. 

By Harshil Patel. UP Global Sourcing Holdings (LSE:UPGS) sells its homeware products via supermarkets, discount retailers and online. Its business is growing. Led by a competent management team, it has managed to grow profits steadily over several years. 

Looking forward, future growth is likely to come from overseas. International sales grew faster than UK sales last year. And there is potential to expand across Europe.  

Most of its sales come from a handful of its brands. As such, UP is likely to keep its focus on them. That should bring additional benefits by building scale and keeping development costs low. 

Bear in mind that it is currently reliant on its operations in China, and any post-Covid disruption could be an area to watch.  

That said, if I had some spare cash, I’d certainly buy this small-cap stock. It’s a profitable business with a resilient balance sheet. With a price to earnings ratio of just 10, and a dividend yield of 5%, the shares look cheap to me.  

Harshil Patel does not own shares in UP Global Sourcing Holdings. 

The post Best British small-cap stocks to buy for February appeared first on The Motley Fool UK.