This marked another milestone in what’s been an impressive rally, supported by strong earnings, rising energy prices, and positive investor sentiment amid a stable inflation outlook.

What’s driving the rally?

The stellar performance has been boosted primarily by surging oil stocks such as BP and Shell, which gained after the US imposed new sanctions on Russian oil majors Rosneft and Lukoil. These geopolitical developments lifted crude prices by roughly 5%, directly benefitting the energy-heavy FTSE 100 index.

Blue-chip companies like the London Stock Exchange Group and Rentokil also reported upbeat earnings, further fuelling the rally.

But while many big-name shares are soaring, I like the look of one small FTSE share that’s been quietly making gains — Marston’s (LSE: MARS). This specialist brewery and pub business jumped 12.5% last week after a strong profit outlook.

As someone who appreciates a good pub on a summer day, I decided to find out if there’s an opportunity here.

Let’s take a closer look.

A promising growth stock

While Marston’s itself may not be a household name in the UK, its wide selection of well-established pub brands and beer products are a frequent part of everyday life. Recently, the company has been in the news for a surprisingly optimistic outlook, with forecasts indicating that its annual profit will surpass market estimates, signalling a potential turnaround after a challenging period.

This optimistic projection contributed to Marston’s being the top gainer on the FTSE small-cap index recently, reflecting investor confidence in its recovery prospects.

Despite the positive forecast, it appears undervalued based on its forward price-to-earnings ratio of 5.84, which is significantly below the market average. This suggests that the stock could be a bargain for value-focused investors.

The growth is undoubtedly welcome, considering its balance sheet shows signs of strain. With a debt-to-equity ratio of 1.89, it’s operating with a high level of leverage, posing risks if profitability wanes or interest rates rise.

There are some other risks too, such as inflationary pressure on consumer spending that would affect pub sales. Not to mention, regulatory challenges and limited financial flexibility due to debt obligations.

Still, Marston’s overall seems like an intriguing opportunity to me, especially given its recent rally and undervaluation. As always, careful consideration of its financial stability and macroeconomic factors is pertinent before making any decisions.

Cheers to that

The recent performance of the FTSE 100 has been notably strong. Despite broader concerns about a market crash, the battle to reduce inflation continues and hope remains that the Bank of England might ease interest rates sooner than expected.

Against this backdrop, I think Marston’s is an appealing small-cap stock for growth-focused investors to consider. Its recent profit forecast and performance suggest significant potential, and it still appears undervalued. If it continues to deliver better-than-expected results, it should be able to reduce its debt level further and bolster its balance sheet.

Not only that, but it’s an interesting development for a pub stock at a time when alcohol giant Diageo is also showing signs of a recovery.

Maybe that calls for a drink, after all. Cheers!

The post As the UK stock market hits new highs, this dirt cheap FTSE share looks promising appeared first on The Motley Fool UK.

Marston’s

Trading conditions are becoming increasingly difficult for the traditional public house. Changing consumer habits, cheap supermarket booze, and soaring costs have all smashed profitability acros the sector.

Combined, these pressures have seen 2,000 pubs close their doors for good since the start of 2020, according to Altus Group.

But City analysts don’t hold any fears for Marston’s (LSE:MARS). They expect strong earnings growth all the way through to financial 2027, as the table below shows.

Marston’s isn’t immune to broader pressures in the pub sector. But its sales are outperforming the broad industry thanks to its diversified estate. Its portfolio includes an even spread of differentiated venues from your local traditional pub to sports pubs, adult dining pubs, and family pubs.

It’s a recipe that’s proving to be a winner. Reported and like-for-like revenues were up 3% and 4.8% in the last fiscal year, pushing underlying operating profit 17.9% higher.

Market-beating sales aren’t the only impressive thing at Marston’s. Margins are booming thanks to initiatives like cutting labour and energy costs, changing pub menus, and improving revenue per customer.

Last year, the underlying EBITDA margin leapt 190 basis points to 21.4%. And Marston’s is targeting margin expansion “of 200-300 basis points” from this point on as its efficiency strategy rolls on.

I’m still a bit concerned about the high levels of debt the pub operator’s servicing. This has dropped significantly, but net-debt-to-EBITDA was still high at 6.5 times as of September.

But the cheapness of Marston’s shares still makes it worth a very close look, in my opinion. Its forward price-to-earnings (P/E) ratio is 5.4 times, while its price-to-earnings growth (PEG) multiple is just 0.1.

Any reading below one implies that a stock is undervalued.

TBC Bank

Political uncertainty in Georgia makes investing in its local companies higher risk than usual. The economic impact of whether the country chooses closer ties to Russia or the EU will be significant.

Yet some Georgian shares are so cheap they’re still worth a close look, in my view. TBC Bank (LSE:TBCG), for instance, has a forward P/E ratio of 3.9 times and a PEG ratio of 0.2.

A low valuation isn’t the only attractive thing that TBC Bank shares with Marston’s. As the table shows, earnings here are also tipped to continue taking off:

This isn’t a surprise (to me at least) given the ongoing strength of Georgia’s economy. Latest data showed GDP expand a whopping 11% in quarter three, the sort of figure the UK — and with it domestic banks like Lloyds — can only dream of.

Cyclical shares like TBC Bank are reaping the rewards of this breakneck growth. Thanks to soaring loan demand, TBC’s pre-tax profit leapt 19.1% in the three months to September.

WIth low banking product penetration persisting, I’m expecting the bank to continue enjoying staggering earnings growth as the economy grows. Analysts at Statista are expecting supportive GDP growth to continue to 2029 at least, as shown below:

It’s not without risk, as I mention. But the possibility for further substantial profits and share price growth makes TBC a growth share to consider.

The post 2 dirt-cheap UK growth shares to consider for 2025! appeared first on The Motley Fool UK.

One reason is that the trading update released on 11 October 2023 suggests the company’s turnaround plans are beginning to work.

There’s a fair chance the recovery of the enterprise may continue. And Marston’s could thrive if the well-known tsunami of cost and economic pressures eases. 

If that happens, we could see recovery in the stock. However, it is near its lows as I write.

Positive outcomes are never certain. However, the fallen share price is a chance for investors to look deeper into the business now before committing to the stock.

A traumatised sector

The dwindling number of pub outlets nationally helps to reduce competition in the sector. And that looks like an opportunity for slick operators to attract customers.

There’s no doubt that trading conditions have been brutal for pubs. But economies of scale can help big chains like JD Wetherspoon and Marston’s to survive and thrive. 

And the management teams of bigger organisations can step back from day-to-day operations to guide the strategic moves of their businesses – that’s a big advantage over small, owner-run pub enterprises. 

JD Wetherspoon’s turnaround is going well, for example, and this is reflected in its share price chart.

I’m optimistic that Marston’s stock can recover too.

Nevertheless, things have been tough for the business. And the directors have been working on a turnaround plan for some time.

The update mentions a double-digit sales increase for the trading year to 30 September 2023. However, general inflation of prices will likely account for at least some of that.  

City analysts have pencilled in a decline in earnings of around 60% for the year just ended. But they expect a bounce-back near 27% for the current 12-month period.

Meanwhile, the directors said customer demand “remains encouraging”. And the company has fixed its energy costs and a “significant proportion” of food and drink expenses for the current year.

On top of that, simplification of the business structure and axing the head office staff numbers looks set to deliver annual savings of around £5m.

The improvements may help the business achieve its profit estimates. And the directors have a “high degree of confidence” for the current year.

Aiming to reduce debts

One of the risks to consider is the company’s big pile of borrowings shown on the balance sheet. The directors are focusing on debt-reduction and making some progress. 

The update explains that loans are mostly long-dated and asset-backed. And 93% of the borrowings are hedged and not at risk from any changes in interest rates during the coming year.  

Looking ahead, chief executive Andrew Andrea pointed to an improving outlook. Cost headwinds are reducing. And Andrea thinks Marston’s is well-placed to “outperform” in the current macroeconomic environment.

There’s risk here, for sure. But with the share price near 28p, the forward-looking earnings multiple is around four for the current year. That looks low, but that rating must be considered alongside the debt pile.

Overall, I think Marston’s is worth deeper research now. And I’m watching it to see if the turnaround gathers pace. 

The post Is Marston’s a stock to buy for recovery alongside JD Wetherspoon? appeared first on The Motley Fool UK.

Marstons

Pub group Marstons (LSE: MARS) releases its latest set of interim numbers on 16 May. Thanks to the aforementioned cost-of-living crisis and the likelihood that more people are staying at home rather than going out, I wonder just how good they will be.

Certainly, the share price has been in awful form, dropping over 50% in the last 12 months.

But there’s a bigger problem with the investment case, in my view. Even if Marstons’s shares do fly from here following an upbeat outlook statement (possibly in anticipation of warmer weather), the huge amount of debt on the balance sheet — £1.6bn at the end of the last financial year — makes me nervous.

Perhaps I’m being overly pessimistic. We know that people will drink through good times and bad. Marstons’ pub estate is also largely freehold too.

Even so, there are no dividends on offer here to keep me patient. For this reason, I consider May’s update required reading but only as a way of gauging consumer sentiment.

Watches of Switzerland

There was a time when luxury retailer Watches of Switzerland (LSE: WOSG) could do no wrong.

Flush with Covid-19 savings, many people engaged in ‘revenge shopping’ when restrictions were lifted. A fair bit of that cash ended up in this company’s tills. The share price from 2020 to the end of 2021 was, consequently, a thing of beauty.

Unfortunately, things have been far less comfortable for holders since. And, similar to Marstons, there hasn’t been any income stream to soothe the pain.

On a more positive note, the stock does look far better value than a year or two ago. A forecast price-to-earnings (P/E) ratio of 14 for the new financial year (beginning 1 May) is attractive, considering the company’s rising margins.

For this reason, I wonder if the trading update for Q4 and the full year on 17 May could see buyers return. The fact that Watches reported a 17% rise in reported revenue in the previous quarter certainly bodes well.

In the meantime, investors can salivate over Tuesday’s rumour of a possible bid.

Pets at Home

A third FTSE 250 firm that I plan to check in on is pet product retailer and services provider Pets At Home (LSE: PETS). Full-year numbers from the company are due on 25 May.

By contrast to the other two stocks mentioned here, the £1.8bn-cap business has been in fine form lately. Shares are up almost 30% since the beginning of 2023.

Has the stock climbed too high, too fast? Well, the gains certainly put those of the index to shame (not even +1%). A P/E of 18, while not yet excessive, doesn’t scream value either. So there could be some profit-taking ahead, even if results hit expectations.

On the other hand, Pets At Home strikes me as a particularly good stock to hold at times like this. Spending on furry companions tends to stay fairly resilient and ownership rocketed during lockdowns.

Throw in a projected 3.3% dividend yield and I’d be happy to buy a slice of this company if I had the cash to do so.

The post 3 FTSE 250 stocks I’ll be watching like a hawk in May appeared first on The Motley Fool UK.

One more for the road

The first idea is Marston’s (LSE:MARS). The pub and brewing company operates 1,468 pubs across the UK, employing around 12,000 people. Over the past year the share price has fallen by 56%, pushing it to 33.5p.

What are the problems? This time last year, the business warned of a continued hit to sales due to lingering Omicron and general Covid-19 issues. As we moved into the summer and beyond, high energy and food costs put further pressure on Marston’s. Finally, the cost-of-living crisis has forced some customers to find cheaper options for food and drink via staying at home.

Inflation does remain a risk going forward, but the other problems, I feel, are fading. Certainly, the presence of Covid-19 is in the rear mirror. The cost-of-living crisis hasn’t gone away, but people have adapted over the past six months.

To this end, a January trading update showed that the growth stock is getting momentum back. Like-for-like sales for the 16 weeks to the middle of January 2023 were up 12.9% versus 2022. Interestingly, for the five key festive days at the end of the year, sales were up 26% versus the 2022 full-year. With sales increasing and costs moderating, profitability should increase for 2023, lifting the share price.

Looking to (the) future

The second stock to consider is Future (LSE:FUTR). The media company owns and operates magazines and sites including Country Life, Go.Compare and Cycling News.

Over the past year, the share price has fallen by 54%, with it trading as low as 1,043p this week. Investors were worried recently regarding the banking exposure the company had to the failed Silicon Valley Bank, even though it was relatively modest.

Further, the departure of CEO Zillah Byng-Thorne after a decade at the helm is seen as a big loss for the business. She has been instrumental in growing Future over the past few years.

It has a relatively simple business model, but one that has been proven to work over many years. It makes money from advertising, affiliates and directly from selling to consumers. For each of the past five years, profit before tax has risen. From £4.4m in 2018, this rose to £170m in 2022.

Based on the strength of the business financially and the continued push to buy brands or grow organically, I’m surprised at how low the share price is. In the long run, I feel this will correct, with a fairer valuation being higher than the current one.

The post 2 growth stocks on my radar at 52-week lows right now appeared first on The Motley Fool UK.

The brewer and pub operator’s last full year ended on 1 October 2022. And it showed a big improvement over 2021. Revenue almost doubled, and profit returned after several years of losses.

The hospitality business was one of the hardest hit by the Covid pandemic. And as the chart above shows, Marston’s shares plunged along with profits.

We’re looking at a 60% slump in five years. Even over the past 12 months, as forecasters turn bullish, Marston’s shares are down 45%.

Valuation

Analysts expect earnings growth for 2023, which would put the shares on a price-to-earnings (P/E) ratio of only around eight. However, I must be cautious here.

We’re barely into Marston’s financial year, and a lot could happen before we reach its end. Still, for the 16 weeks to 21 January, like-for-like sales were 13% ahead of last year. And compared to the same period in pre-pandemic 2019-20, sales were up 4.5%.

There are plenty of shares on low P/E multiples these days though. It doesn’t necessarily mean they’re good value, and a good few really do warrant low prices.

Forecasts

But looking further ahead, forecast earning growth could drop the P/E to around 5.5 in 2024, and to five by 2025. Again, forecasts need to be treated cautiously. But I don’t see many showing that kind of growing earnings and falling valuation.

What’s the downside (because there has to be one, doesn’t there)? Well, yes, there’s no such thing as a free beer. In Marston’s case, as with so many damaged by the pandemic, it’s debt.

At 1 October 2022, net debt stood at a whopping £1,216m. That’s down a bit from 2021, when it reached £1,232m. But the company’s market-cap is only £300m. The debt mountain is valued at four times the entire company. That makes those P/E valuations perhaps a bit misleading.

Real valuation?

We can calculate an enterprise value P/E multiple by adding net debt to the firm’s market-cap, and comparing that to earnings. On that measure, even the forecast 2025 P/E would rise to an effective 25. And that doesn’t scream to me to buy.

So does debt wipe out any value in the current Marston’s share price? I don’t think so. Marston’s operates a largely freehold pub estate. At the end of the 2022 year, its property was valued at £2.1bn. That puts its net asset value per share at 102p, with the shares priced at just 44p, as I write. I see attraction there.

Good value?

If the board is successful with its debt reduction strategy in the coming years, I think the shares could look good. If earnings forecasts are close to accurate, improving cash flow could make a real difference. And we might even see dividends, as forecasters also suggest.

So no, Marston’s shares might not quite be a steal right now. And the true valuation might be hard to pin down. But I could see a long-term buy here for patient investors.

The post Are Marston’s shares a steal based on strong forecasts? appeared first on The Motley Fool UK.

Pubs and bars

Marston’s is an owner and operator of pubs and bars, as well as an ale brewer with over 180 years of experience. It has a workforce of over 14,000 people and is a powerhouse in the leisure sector with more than 1,500 locations. It also operates six breweries that produce over 60 different ales.

So what’s the current state of play with Marston’s share price? Well, as I write, the shares are trading for 35p, putting them in the penny stock category. At this time last year, the stock was trading for 83p, which is a 57% decline over a 12-month period. I’m not concerned by the current share price drop, caused by macroeconomic headwinds. In fact, I view this as an opportunity to buy cheaper shares.

Challenges to note

There are a few current macroeconomic headwinds at play such as soaring inflation, rising costs, the energy crisis, and the supply chain crisis. Marston’s shares have fallen and the business could suffer further yet. For example, rising costs eat into profit margins. Next, the energy crisis here in the UK is causing many businesses to crumble under pressure from higher energy costs.

Finally, due to these factors, a cost-of-living crisis has emerged in the UK. Marston’s could see its customer numbers fall as people have less money to spend on going out.

Why I like Marston’s shares

So let’s take a look at the bull case then. To start with, I believe the risks mentioned earlier are shorter term. My belief is that a business like Marston’s, with its diversified offering, brand power, and large presence in the UK should be able to boost growth, performance, and shares in the longer term.

Despite Marston’s performance falling since the pandemic, which was a really tough period for all in the leisure industry, it still manages to record a consistent profit. I believe it can return to pre-pandemic levels eventually based on previous track record, as well as my points earlier around brand power and size.

One final positive aspect I believe that could boost Marston’s in the longer term is pent-up demand. The pandemic gave many people a new-found appreciation for socialising, and attending their favourite restaurants and bars. When restrictions originally eased last year, pent-up demand boosted many businesses, Marston’s included. This resurgent attitude towards socialising should continue to boost Marston’s, in my opinion.

My verdict

In conclusion, I expect Marston’s shares to experience some tough times ahead, more so in the shorter term. Despite that, they look like a cheap penny stock option for me to buy and hold for the long term with a diversified business model, a great presence, and brand power. I’ll be buying the shares imminently.

The post I’m buying this penny stock in October for long-term growth and returns! appeared first on The Motley Fool UK.

Pharos Energy

Pharos Energy (LSE:PHAR) has performed reasonably well over the past year. As markets have slumped, the firm’s share price has only fallen by about 6%. It currently trades at 23.1p. 

The firm, which is an oil and gas explorer and producer, has quickly revived its fortunes over the past two years.

In 2020, it reported a pre-tax loss of $241m. By the next year, this had turned into a pre-tax profit of $38.6m.

It’s no secret that most oil companies are currently benefiting from surging prices of both Brent and WTI crude oil. This price trend essentially makes Pharos Energy’s produce more valuable.

The company stated in November that it had seen high flow rates from the first three wells dug at its Vietnam operation, with a fourth well to be perforated in due course.

It has also drilled three wells at its project in Egypt, but recently agreed to sell 55% of its assets to a private equity firm. This transaction bags the company $5m immediately, plus significant performance-based add-ons.

Given the nature of oil exploration, however, it’s always possible that projects could deliver little or no oil.

Marston’s

Secondly, Marston’s (LSE:MARS) endured a torrid time during the two years of the pandemic. With restrictions on eating out, this pub firm really felt the pinch. It currently trades at 54p.

For the year ended October, between 2020 and 2021, however, pre-tax losses narrowed from £388m to £171m.

Furthermore, for the six months to 2 April, pre-tax losses were just £7.5m, down from £122m for the same period in 2021. Revenue also increased from £55.1m to £370m over the comparison period.

Although past performance is not necessarily indicative of future performance, these improving financial results do give me confidence as a potential investor.

While the business is now benefiting from the relaxation of pandemic restrictions, it’s also now feeling the effects of higher electricity prices, tighter food supplies, and wage inflation. 

The company does have certain pricing strategies up its sleeve to try and relieve this pressure, but there’s the very real chance that these economic factors begin to eat into future balance sheets.   

Overall, these two businesses are currently in decent shape. While their penny stock status does heighten my investment risk, I will be splitting my £1,000 equally and buying shares in both stocks next month.

The post How I’ll invest £1,000 in penny stocks in July! appeared first on The Motley Fool UK.

Robust markets

Staffline Group (LSE: STAF) is admittedly in some danger as the UK economy cools. If breakneck inflation persists and companies struggle then demand for its recruitment services could tank.

That said, I’m encouraged by the resilience of Britain’s labour market so far. And this could still encourage me to buy the penny stock today.

Indeed the Recruitment and Employment Confederation announced this week that, “Demand for permanent staff remains buoyant despite increased economic concerns”. Consumer price inflation hit fresh 30-year highs in April yet companies’ hiring intentions for the short-to-medium term has continued to rise.

“Strong start”

Staffline itself celebrated the ongoing robustness of the UK jobs market a month ago as it described the “strong start” it had made to 2022.

The company added then that while economic uncertainty had increased, its “strong market share in resilient sectors” like food distribution, e-commerce, and logistics helps give it decent earnings visibility.

City analysts believe conditions will remain favourable for Staffline as well. They think the penny stock’s profits will soar 246% year-on-year in 2022. And this leaves it trading on a forward price-to-earnings growth (PEG) ratio of 0.1.

Any reading below one suggests that a stock could be undervalued. At these prices I think Staffline is a steal.

Rewards vs risks

Pub operator Marston’s (LSE: MARS) is another penny stock that could suffer as the cost of living crisis intensifies.

It’s a danger that brewing giant Heineken highlighted this week. On Wednesday it said that it the impact of increasing inflationary strain on household disposable income poses “a consequent risk to beer consumption later in the year”.

In the UK, where all Marston’s pubs are located, inflation is tipped to peak at 8.7% in 2022 by the Office for Budget Responsibility. That could really weigh on drinkers’ budgets.

Another cheap penny stock

Naturally the danger of ballooning living costs to pub operators is particularly high. The cost of a pint or a glass of wine at one of Marston’s inns is far more expensive than what you or I would pay for a bottle at the supermarket to drink at home.

Still, as a long-term investor I’m tempted to buy Marston’s for my portfolio. I think a forward price-to-earnings (P/E) ratio of 9.8 makes it too cheap to miss.

Data shows that Brits continue spending larger proportions of their discretionary income on leisure activities like drinking and eating out. This is an established trend that I think Marston’s will profit handsomely from when those current dangers pass.

City analysts believe the penny stock will continue recovering from the damage wrought by Covid-19 lockdowns, too. They think Marston’s will bounce back into profit this year (to September 2022) following two years of losses and grow earnings 38% in financial 2023 as well.

Protection from rising inflation

I think buying property stocks is a good way to protect myself against rampaging inflation. This is because rents by and large rise in line with broader prices. It’s a quality that not all UK stocks share.

I think Empiric Student Property (LSE: ESP) in particular could be a top buy right now. As well as helping me guard against inflation today, it could make me a lot of cash in the years ahead as student numbers jump and the need for dedicated accommodation increases.

Latest figures from the Higher Education Statistics Agency showed the number of UK students leap 8% in the 2020/2021 academic year. The number of full-time first-year students also grew at the fastest pace on record. These numbers illustrate the massive opportunity for Empiric Student Property.

Chunky dividends!

City analysts are expecting the penny stock’s earnings to double year-on-year in 2022. Consequently the company trades on a forward PEG ratio of just 0.3.

I like Empiric Student Property too because of its healthy dividend yields. These sit at 3% and 4.1% for 2022 and 2023 respectively. I’d buy it despite the threat that Covid-19 poses to student enrolment levels in the near term.

Another dividend-paying penny stock to buy

Speaking of high dividend stocks, Centamin (LSE: CEY) is a gold stock whose big yields make it an attractive investment target. The forward yield here sits at a huge 5%.

There’s a couple of good reasons I think Centamin is a great buy today. The first is that I believe gold prices could be on the verge of soaring again as inflationary pressures grow. Demand for gold rises when the value of paper currenices come under scrutiny.

This week Bank of America said that it expects gold to hit $2,175 per ounce in the current climate. That’s around 100 bucks higher than summer 2020’s record peaks.

Production boost

I also like gold stock Centamin because of the steps it’s taking to boost production over the medium-to-long term. The company plans to deliver 500,000 ounces of the shiny stuff each year from its Sukari flagship mine over the next decade. Centamin is on track to dig between 430,000 and 460,000 ounces of gold from its Egyptian asset in 2022.

Centamin’s a great way to make money from a strong gold price in my book. But of course there’s no certainty that precious metal prices will rise. Rapid central bank rate hiking and a robust rise in the US dollar could send gold prices lower.

However, on balance I think — as a long-term investor — that the benefits of owning Centamin shares offset the risks. I also think its undemanding forward P/E ratio of 12.2 times makes the penny stock a great buy (it’s expected to enjoy a 10% rise in annual profits this year).

The post 4 of the best cheap penny stocks to buy in May! appeared first on The Motley Fool UK.

Here are two dirt-cheap penny stocks I’m thinking of snapping up.

Marston’s

I think pub operator Marston’s (LSE: MARS) is a top buy as conditions in the leisure sector steadily improve. At 84p per share, the business trades on a forward price-to-earnings (P/E) ratio of just 11.3 times, an attractive valuation given the strength of recent industry news.

This penny stock’s most recent update in January revealed how sales were bouncing back following lockdowns earlier in 2021. Latest financials from industry rival JD Wetherspoon confirm that drinkers are returning to the bar in large numbers too. On Friday, Wetherspoons said that sales in the previous three weeks were just 2.6% below 2019 levels in what it said was part of an “improving trend”.

The Marston’s share price has rebounded solidly in recent weeks. I think it could keep marching higher too as people continue emerging from Covid-19 hibernation. I am concerned by the impact that rising beer, labour and energy costs could do to profit margins at pub operators like this. But as a long-term investor I think the rewards of owning the leisure business outweigh the risks.

The amount people spend on going out is on a continuous uptrend (barring those coronavirus-related interruptions). And Marston’s, with its large estate of pubs, eateries and hotels, is well-placed to capitalise on this.

Breedon Group

I believe that building materials supplier Breedon Group (LSE: BREE) also offers unmissable value right now. At 86p per share this penny stock trades on a forward price-to-earnings growth (PEG) ratio of 0.6. A reminder that any reading below 1 suggests that a stock could be undervalued.

Breedon is a highly-cyclical business. And, as a consequence, I need to consider the impact that Britain’s darkening economic outlook could have on its revenues. Uptake of its aggregates, concrete and other products would likely suffer a sharp slowdown if construction activity begins to cool.

This is a risk I think is baked into Breedon’s rock-bottom valuation however. In fact, I remain quite upbeat about the company’s earnings outlook today. Historically-low interest rates and government support for first-time buyers mean that homes demand should continue to outstrip supply. So sales of its bricks, tiles et al from developers are likely to remain rock-solid as building rates pick up.

Government commitments to increase infrastructure spending also bodes well for Breedon in the short term and beyond. And demand for its goods should remain supported by a healthy repair, maintenance and improvement (or RMI) market. Breedon reported record volumes, turnover and profits in 2021. And it looks in great shape to build on this momentum.

The post 2 cheap penny stocks to buy for my Stocks and Shares ISA! appeared first on The Motley Fool UK.