However, despite this elevated risk, some investors are still keen on pursuing opportunities within this space. After all, just one successful early investment into a penny stock can lead to explosive returns that can undo the losses of other positions. And right now, Nanoco Group (LSE:NANO) is making waves.

Investing in nanotechnology

While Nanoco isn’t a household name, owners of Samsung’s QLED TVs have been exposed to its technology. The firm is a developer and manufacturer of cadmium-free quantum dots. These nanomaterials have a broad range of specialist uses, from medical diagnostics to electronics.

In the case of Samsung, the electronics giant was using them to improve the quality of the backlighting within its LED displays. Or at least that was the conclusion of a recent legal action brought forward by Nanoco, which it ultimately won through settlement.

Following this outcome, the firm has just had its balance sheet flooded with $71.8m (£58.8m) in net proceeds. Apart from solving the group’s capital requirements, Nanoco is on track to hit management’s target of being financially self-reliant by 2025.

At the same time, the firm also just secured its first commercial production order for its nanomaterials to be used in infrared sensing. And to top things off, it’s formed a two-year joint development agreement with STMicroelectronics, as well as another one with an undisclosed Asian chemical enterprise.

With all this in mind, the group’s £67.5m market capitalisation is looking cheap. Or at least, that’s what management’s implying following the announcement of a 24p tender offer totalling £30m and another £3m buyback programme at market prices.

Risks and rewards

Even with the £33m return of capital, Nanoco could have around £34m of cash liquidity left on its balance sheet to fund its operations. That’s more than sufficient to keep the lights on for several years and provides management with the flexibility to accelerate its R&D activities. This is generally something I like to see when analysing businesses.

However, as encouraging as this progress has been, there’s still a long road ahead. With the company transitioning from a research-based to a commercial-based enterprise, there’s a risk of disruption.

Such business evolutions can come paired with a lot of complications that may lead to order delays and unexpected costs. In fact, this is precisely what happened with another popular penny stock called ITM Power.

Despite my optimism for this enterprise, I’m keeping it on my watchlist for now. There’s no denying its explosive long-term potential, but the company still has a lot to prove. But suppose it sucessfully hits its 2025 target milestone? In that case, I may have to reconsider my position.

The post Here’s a 20p penny stock with explosive growth potential appeared first on The Motley Fool UK.

In 2024, the London Stock Exchange has no shortage of such shares. Following the recent market correction, valuations — especially among small-cap companies — have tumbled. But while this is undoubtedly frustrating, it may have also created buying opportunities among the companies that show plenty of potential.

With that in mind, let’s explore some of the more interesting propositions in penny share territory that might be worth watching closely.

A rising helium supplier

Shares of Helium One Global (LSE:HE1) have garnered a lot of attention from investors in recent years. And for good reason. The firm is engaged in helium gas exploration projects in Tanzania. And while it has yet to extract anything from the ground, the latest test results from its Itumbula West-1 site suggest that may change in the coming years.

In fact, the group could be sitting on top of one of the world’s most valuable helium sites. While the use cases for the gas are fairly niche, the lack of supply has made it valuable, especially within the healthcare and aerospace industries. An extended well test is planned for the third quarter of 2024. And if this delivers further positive results, Helium One will be another step closer to potentially becoming a critical global supplier of helium gas.

Of course, with all eyes on this test, a negative result or even a delay could be disastrous for the share price. So, investors will have to watch and analyse progress closely.

A rebound in homebuilding?

Higher interest rates slowing activity among the UK’s leading homebuilders and contractors have created several headwinds for HSS Hire (LSE:HSS). The tool & equipment rental enterprise has seen its growth and operating profits flatten, sending the penny stock in the wrong direction.

However, with mortgage rates and property prices falling, there are some early indicators of home buying demand slowly beginning to rise again. This could spark construction back into action. And with it, provide a far more favourable macroeconomic environment for HSS to get back on track.

While the group’s indebted balance sheet does limit its financial flexibility, leverage has been slowly getting more manageable. That’s why I think investors should be keeping an eye on this business throughout 2024.

Exploring nanomaterials

On the more cutting-edge side of things, Nanoco Group (LSE:NANO) has been making waves. The group specialises in cadmium-free quantum dots. These are tiny particles used in a variety of specialist industries, such as semiconductors and medical imaging.

Apart from winning a major legal battle against Samsung, the group has recently secured its first commercial contract as well as signing two joint development agreements — one of which is with STMicroelectronics. This has flooded the balance sheet with cash. And while at least £33m is earmarked to be returned to shareholders, Nanoco seems to be on track.

Of course, transitioning from a research- to a production-based business comes with its own set of challenges. But if the firm continues to hit impressive milestones, it may warrant a closer look from potential investors.

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Well, I won’t buy any share if I don’t think I’d want to keep it for 10 years, no matter what the price. In fact, the share price is one of the things I pay the least attention to.

So are there any priced below a pound, in companies with market-caps of £100m or less, that look like long-term keepers? Here are three that might make the cut.

Nano technology

Nanoco (LSE: NANO) shares have had a tough five years. And they’re way down from the heights of 2013.

Nanoco does what’s called quantum dot technology, used in solar cells, among other things.

It’s been a ‘jam tomorrow’ growth stock for some time. And it’s an example of the risk we face when we buy into new technology stocks. But interim results in March make me think the jam might be here soon.

The firm says the final valuation for its commercial product materials is underway. And it expects orders by the end of 2023.

Nanoco has sold some intellectual property. So it looks like it’s on a decent financial footing now.

It’s risky, and I might wait to see those orders happen before I’d buy. But if it turns profitable, I could see this as a 10-year holding.

Tiles and floors

Topps Tiles (LSE: TPT) sells tiles and flooring products. And the share price has lost 50% in five years.

Judging by its first-half update, Topps seems to be doing fine. For me, it’s a value play, as I rate the shares as oversold.

A price-to-earnings (P/E) ratio of 15 might not look cheap. But forecasts suggest it could halve in the next few years.

The dividend yield is above 7%, and again that would rise in the coming years if the analysts are right.

There’s clearly a risk that Topps Tiles shares could remain depressed, or even fall further, if interest rates rise again. And another rise does seem inevitable.

Interim results are due on 23 May. Might we see an upbeat response from investors?

Back in fashion?

I think 2023 might be a good year to get back into Superdry (LSE: SDRY). The retailer fell out of fashion big time, and the shares are down more than 90% in five years.

Forecasts have a loss down for this year. But they show a nice turnaround coming, which could drop the P/E to just nine in a couple of years.

Liquidity has been a problem. But a new equity issue has just raised a gross £12m. If that’s enough to keep it going until it’s back to profit, I think this might even be one of the UK’s best penny stock buys.

CEO Julian Dunkerton has just bought nearly a million shares, and that’s also a good sign.

A loss this year might make it too much of a risk right now. So it might be wise to wait a bit. But if I buy, it will again be for at least a decade.

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They can be found in everyday consumer products, including smartphones, laptops, televisions, and washing machines. They also have applications in many other areas, such as information technology, artificial intelligence, communications infrastructure, medical equipment, transportation networks and military systems. In fact, it’s no exaggeration to say that semiconductors are integral to the entire global economy.

According to the Semiconductor Industry Association, a record 1.3 trillion units were shipped in 2025 with sales surpassing $600bn for the first time. But with AI infrastructure spending still marching upward, analysts’ forecasts are projecting even more growth before the end of the decade.

This could make UK semiconductor stocks an attractive proposition. But what are the best chip companies to invest in, and is this market sector right for you? 

What are semiconductor stocks?

Semiconductor stocks are companies that design and manufacture computer chips, whose shares can be bought and sold on a public stock market. 

The industry is sometimes divided into two sub-sectors:

• Semiconductors
• Semiconductor Equipment & Materials

Companies in the former category are producers of semiconductor chips. Companies in the latter category supply tools, parts, and equipment to the semiconductor industry.

Top semiconductor stocks in the UK

Here are the leading UK semiconductor shares traded on the London Stock Exchange in order of market cap as of January 2026: 

Oxford Instruments

Oxford Instruments is a long-established and profitable technology company. It’s also currently among the largest UK semiconductor stocks.

The company serves a range of different markets, including materials analysis as well as healthcare & life sciences. But in recent years, semiconductors have become an increasingly larger core part of operations, generating 29% of revenue in 2025 – it’s the second largest segment.

Management has signalled its confidence in further growth in demand by building a new state-of-the-art facility in Bristol to house its compound semiconductor systems business. Capabilities include fault-finding and failure analysis within advanced micro devices for the leading semiconductor manufacturers, and cleanliness control in precision manufacturing.

IQE

IQE describes itself as “the leading global supplier of advanced compound semiconductor wafers”. These wafers have a diverse range of applications across handset devices, telecoms infrastructure, and 3D sensing.

In recent years, the company has struggled to maintain growth, with earnings consistently providing elusive growth, a struggle that continued throughout 2025.

However, entering 2026, thanks to the tailwinds of AI spending, the group’s order book does show signs of strength, offering improved demand visibility.

CML Microsystems

CML Microsystems occupies a profitable niche in the development of mixed-signal, radio frequency, and microwave semiconductors for global communications markets. It targets sub-segments with strong growth profiles and high barriers to entry.

CML believes its diverse, blue-chip customer base and broad product range largely protect it from the cyclicality usually associated with the semiconductor industry.

Nanoco Group

Nanoco is another young UK semiconductor company that’s still loss-making – albeit by a small margin.

Its niche focus on quantum dots and nanomaterials limits the group’s current market penetration opportunities. However, with new technological innovations accelerating, demand for its specialised products is slowly starting to ramp up. And in the meantime, the business has continued to deliver resilient revenues reaching £7.6m in its 2025 fiscal year.

Nevertheless, management continues to describe its business as “a world leader in the development, manufacture and supply of quantum dots and other semiconductor nanomaterials”.

Investing in foreign semiconductor markets

UK semiconductor stocks are relatively small when viewed on the world stage. As such, investors seeking to buy shares in industry giants will have to look to overseas stock markets.

Leviathan Taiwan Semiconductor Manufacturing Co and Dutch colossus ASML can both be traded in the US market. And of course, the US has homegrown powerhouses.

• Nvidia Corporation – $4.45trn market cap
• Broadcom Inc – $1.61trn market cap
• Intel Corporation – $232.4bn market cap
• Qualcomm Inc – $175.9bn market cap

A further option for UK investors is to buy shares of the London-listed exchange-traded fund VanEck Semiconductor ETF. The fund holds 25 of the world’s top chip stocks (including the six just mentioned), and is a one-stop shop for broad exposure to the industry.

Are semiconductor stocks right for you?

Investors considering buying a semiconductor stock need to take a number of things into account. First, it’s important to be aware that the industry is highly cyclical. It’s notorious for periodic supply-and-demand imbalances, leading to spells of feast and famine. Investors need to be prepared to accept some large swings in the share prices of semiconductor stocks.

Another thing to be aware of is that the industry is very much driven by the maxim of ‘smaller, faster, cheaper’. There’s constant pressure on chip companies to come up with ever more advanced technology at lower prices. It can be as short as a few months before one state-of-the-art product is overtaken by another.

To successfully compete for market share, semiconductor companies need to sustain a breakneck pace of innovation. As such, it’s necessary to recycle a high percentage of revenue back into research and development (R&D).

The best chip companies to invest in

While global semiconductor sales growth is a given, translating it into profitable growth is less certain. Therefore, picking the best chip companies to invest in can be tricky.

High gross margins, operating margins, and free cash flow generation, relative to sector peers, can indicate a company that’s operationally efficient and adept at identifying good areas to target R&D. These qualities, together with a strong balance sheet, may better equip a firm to navigate the hazards of the semiconductor cycle.

If you’re prepared to accept some large ups and downs in share prices and to put a bit of work into finding the stronger businesses in the industry, tapping into the structural growth of this market sector may be right for you.

The post Investing in Semiconductors: Top UK Semiconductor Stocks of 2026 appeared first on The Motley Fool UK.

But, I didn’t invest in Nanoco. I only discovered it when I looked for the best-performing UK stocks this year. Now that I am aware of this penny stock and its recent track record, would I buy it for my portfolio?

A semiconductor nanotech penny stock

Nanoco produces quantum dots and nanoparticles. These find applications in OLED displays, security tagging, biometric facial recognition, and possibly diagnostic imaging and targeted drug delivery. A small-cap penny stock in the semiconductor nanotechnology business is bound to generate a fair bit of buzz, sometimes unwarranted. Looking at Nanoco’s share price over time, I can see two occasions when the price ran up, but then crashed. Temporary revenue increases accompanied these episodes.

The latest bull run in this penny stock’s price started in mid-March 2022 and is not baseless. On 17 March 2022, Nanoco announced that it had signed its fourth work package (repeat business is good) for a European customer for delivery of an enhanced and scaled-up version of its technology. As a result, the board felt comfortable saying that this year’s revenue number would exceed 2021’s £2.1m.

Reasons to rally

Other events have helped sustain the rally in this penny stock’s price. There was an agreement to develop a project with an Asian chemical firm in July 2022. Also, investors got updates about the company’s patent infringement lawsuit against Samsung in the US, and the trial might start in October 2022.

It’s worth pointing out that someone else is paying the legal fees and will get an unspecified multiple of any award made to Nanoco in the event of a win. This agreement will also extend to another lawsuit launched in August 2022 against the same party in Germany.

There were also a couple of grant awards from the UK’s innovation fund in summer 2022. Then on 12 September 2022, the board announced that 2023 revenues should be about 20% higher than this year (when finally reported), which should, in turn, exceed the last.

Should I invest in penny stock Nanoco today?

The rally in the Nanoco stock price has a basis. But, there have been several false dawns for this penny stock. If the board’s revenue expectations come to pass, they still won’t beat the £7.1m reported in 2019, and that was not enough to lift the stock price anywhere near its all-time high.

The lawsuit might prove successful. But, investors banking on a significant cash return might be disappointed. Any award gained will be reduced in keeping with that litigation financing agreement. I expect what is left to be reinvested in the business rather than distributed to shareholders.

Nanoco remains a highly speculative penny stock. As such, it does not chime well with my risk tolerance. With these types of stocks, I prefer to wait until something — like sustained revenue increases or perhaps an operating profit — happens to give me confidence in the stock’s prospects before I consider investing. For me, Nanoco is not there yet.

The post If I’d invested £1,000 in this penny stock at the start of 2022, here’s what I’d have now appeared first on The Motley Fool UK.

The penny stock owns and operates office blocks, shopping malls, resorts, warehouses and other property assets across eight or so African countries. Its real estate can be found in some of the continent’s brightest economies like Kenya and Morocco too.

Grit Real Estate is well-placed to exploit soaring economic growth in Africa then. And because it operates across various sectors spanning multiple countries the business offers investors added security by diversification too. I think it’s worth serious attention despite the low uptake of Covid-19 vaccines in Africa. This creates the possibility of economic turbulence if infection rates soar again.

Riding the lithium boom

Soaring sales of electric vehicles (EVs) offer plenty of opportunity for savvy UK share investors. I’ve invested in auto parts manufacturer TI Fluid Systems to play this theme. And I’m thinking of buying shares in IronRidge Resources (LSE: IRR) too, which is developing the Ewoyaa lithium spodumene project in Ghana.

Buying mining shares can be risky business. Exploration and production activity can often run into trouble, resulting in higher-than-expected costs and disappointing revenues. There’s also a possibility that the element a company is mining for could plummet in price if market supply soars or demand sinks.

There’s a lot I like about IronRidge Resources however. I like that Piedmont Resources is investing $102m to fast-track development of Ewooya. I’m also encouraged by its Ghanian lithium asset being one of the ‘greenest’ out there. It’s a quality that could significantly boost demand for its shares from ESG investors as the sustainable investment theme takes off.

And another thing, I’m confident that lithium prices will rise strongly in price. The rate at which EVs are growing means that lithium demand — a key component in these vehicles’ batteries — is likely to outstrip production growth by a large margin.

Another top ESG penny stock

I think Nanoco Group’s (LSE: NANO) another penny stock that could draw increasing attention from ESG investors. The business manufactures displays, electronic goods and lighting fixtures using its highly-patented nano-material technologies. These help customers cut their energy usage and, on top of this, they are made without using toxic heavy metals.

It’s important to remember that Nanoco is reliant upon a small number of companies to drive revenues. Therefore any contract losses from one of these core customers could have a significant impact upon profits.

However, I think the use of its products in fast-growing, next-generation sectors like the Internet of Things and automation still makes it worth close attention. I also like the fact it has more than 700 patents on its products, providing strong protection against potential imitators that should help it win future business.

The post 3 penny stocks to buy today appeared first on The Motley Fool UK.

I own a number of ESG stocks. Biffa and TI Fluid Systems even sit on the London Stock Exchange’s Green Economy Mark list. Companies and funds that meet this criteria “derive more than 50% of their revenues from products and services that are contributing the environmental objectives such as climate change mitigation and adaptation, waste and pollution reduction, and the circular economy.”

Investors don’t need to settle for lower future returns by buying ESG stocks either. I certainly expect the stocks I mentioned above to make me decent long-term profits as the recycling industry grows (in the case of Biffa) and electric vehicle sales take off (TI Fluid Systems).

Here are two other top-quality ESG stocks I think could make me lots of money. I even think billionaire investor Warren Buffett would approve of them!

An ESG stock I also own

DS Smith (LSE: SMDS) is another stock on the Green Economy Mark list I currently own. It recycles paper back into boxes and other packaging products. And it collects the corrugated packaging once it’s been used, significantly reducing waste in the process. It’s also sold off all its plastics-manufacturing assets and has plans to become carbon Net Zero by 2050. I think this FTSE 100 company could make me terrific returns as e-commerce grows rapidly.

Now DS Smith faces a problem in the form of soaring paper costs. But I think Buffett would like this UK share because its colossal manufacturing and distribution network gives it economies of scale that helps it beat many of its rivals on cost. The business is in the process of building two new packaging plants in Italy and Poland to keep growing its global footprint.

A penny stock Warren Buffett might love

I think Nanoco Group’s (LSE: NANO) another stock Buffett would really like. In this case its long-term competitive advantage — or economic moat as he would say — is that it has a considerable portfolio of around 700 patents in the field of quantum dots. Incidentally, the company’s currently litigating against Samsung over alleged patent infringement.

One risk here is that litigation’s a long and expensive process. This has the capability to stretch penny stock Nanoco’s balance sheet to the limit and hit investment in other parts of the company.

But I still think this ESG stock could be a great long-term buy as its nano-materials are becoming increasingly popular in the manufacture of displays, electronic products and lighting. Nanoco’s products contain no toxic heavy metals and can help improve energy efficiency, hence its Green Economy Mark status.

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I don’t know when the new bull market will begin. But history shows that stock markets have always risen strongly as the economic cycle moves from recession and back into growth. I’m confident that the following penny stocks could soar in value during the 2020s. I think buying them today could end up making me a fortune.

#1: The Russian e-revolution

Getting exposure to the e-commerce explosion is a brilliant investment idea in my opinion. I’ve chosen to do this is by buying shares which provide logistics and warehouses services in Britain like Clipper Logistics. I’ve tipped Tritax Eurobox as a buy, too, a property giant which offers the same services on mainland Europe.

I believe that buying Raven Property Group (LSE: RAV) is another great way to play the e-retail boom. This is a penny stock which owns and operates a string of warehousing assets in Russia.

On the one hand, investing in companies operating in Russia can be risky. The country’s economic fortunes are tied very closely to energy prices. And this could be a problem for Raven investors as the world moves towards renewable power sources and away from fossil fuels. Still, I think the rate at which the Russian online retail market is expected to rise over the next few years (at least) still makes this UK property share worthy of serious attention.

The experts at Statista, for example, describe Russia as “one of the major emerging online commerce markets worldwide.” As a result they think e-retail there will more than treble in size between 2020 and 2024, to 7.2trn roubles. It’s a theme which Raven, whose properties are concentrated on the metropolitan areas of St Petersburg and Moscow, is well placed to exploit. Of course, investing in emerging markets brings its own risks, including less stringent regulations, foreign exchange considerations, and political risk.

#2: Another top penny stock

I also think the Nanoco Group (LSE: NANO) share price could soar during the new bull market.

This penny stock manufactures cadmium-free quantum dots and other nano-materials. These are used in the production of displays, advanced electronics, lighting, and biological imaging. Nanoco has well over 700 patents in the fast-growing nano-materials industry, a market which will looks bound to pick up further during the eventual economic upturn.

I also think the new agreement Nanoco signed with microchips giant STMicroelectronics last May is encouraging. The five-year framework agreement will see the penny stock company develop and supply nano-materials for a variety of infra-red sensing applications. Bear in mind, though, that Nanoco is reliant upon a small number of key customers to drive revenues. The loss of a critical US customer a year ago took a huge bite out of billings last year. Losing another client could be bad news for the share price.

The post ISA investing: 2 penny stocks I’d buy for the new bull market appeared first on The Motley Fool UK.

Nano-materials are very small with dimensions typically in the range 1 – 100 nanometres, and used for optical and electrical applications. Quantum dots, meanwhile, are a subclass of nano-material with size-dependent optical and electronic properties. Nanoco makes them for use in displays, lighting and biological imaging because they can be tuned to emit light at different wavelengths across the visible and infrared spectrum.

A long haul in research and development

The company has been around since 2001, suggesting that research and development activity has also been going on a long time. But the fruit of its labour is “a world-class, patent-protected IP portfolio generated both by its own innovation engine, as well as through acquisition.” It also has non-exclusive manufacturing and marketing licensing agreements in the area of display products with The Dow Chemical Company, Merck KGaA of Germany and Wah Hong Industrial Corporation of Taiwan.

Revenues capable of generating profits remain elusive, although today’s full-year results show some progress with the figures. Revenue more than doubled to £3.5m compared to the year before, and billings increased to £6.5m, compared to £1.1m the prior year. There was still a loss after tax of £6m in the period, albeit down from more than £9m last year. The directors said that £1.5m was saved on costs and they have contingency plans to reduce costs further and save cash if there are further delays to commercial revenue streams. Right now, they think commercial revenues will crank up in the first half of 2020.

No-one knows if sufficient cash from operations will roll in before the money in the bank runs out. The company raised a net £7.9m from the stock market in November 2017 and said its cash position stands close to £10m, which it thinks will last until operational cash inflows pick up in 2020. If the income is not as high as expected, or if more delays materialise, I think we should expect another fund-raising event down the road.

On the cusp of commercialisation?

Yet, I find it reassuring that other stakeholders have some skin in the game. In the area of nano-materials for the electronics industry, an undisclosed US company bunged Nanoco £2.6m in milestone payments and fees relating to material development and supply agreements. The US company also made an advance payment of £2.9m, discounted against future product sales so that Nanoco can develop new manufacturing facilities in Runcorn.

Chairman Dr Christopher Richards said in the report said that “some potentially very attractive” commercial opportunities have emerged in the short term. He said the firm is “actively engaged in potentially transformative technological and commercial activities.” 

Although the long-term outlook appears to be positive, the directors are preparing for the possibility of delays in the commercialising process, which sounds like a pragmatic tactic. The share price has been weak, but I think Nanoco is one to keep a close eye on because it could be on the cusp of a commercial breakthrough. We’ll find out more over the next year or so.

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I wasn’t previously familiar with quantum dots. They’re “fluorescent semiconductor nanoparticles” that are typically around 1/1000th the width of a human hair. They absorb energy from light and re-emit the colour in a different colour. They can be used in LCD displays such as computer monitors and televisions to provide vivid, bright colours.

Unfortunately many quantum dots contain cadmium, which is a heavy metal that’s apparently a proven carcinogen. Regulatory pressure to reduce the use of heavy metals in electronics is growing, so Nanoco has focused on developing cadmium-free quantum dots. I’d imagine that demand for this technology could rise rapidly, if it’s commercially successful.

About to hit the big time?

Nanoco published its half-year results this morning. The group reported good progress on several fronts. The company now has “an increasing number of Nanoco-equipped display products moving through to commercial production with customers in Asia”.

The first commercial products using the firm’s technology are expected to reach the market in 2018, so the company could soon start to receive revenue for commercial sales. Analysts expect the group to make a loss of £6.4m on £6.1m of revenue in 2018. In 2019, Nanoco is expected to make a profit of £12.4m on £24.1m of revenue.

To bridge the gap before sales revenue is expected to start flowing, Nanoco completed an £8.6m fundraising in October. Based on the firm’s H1 cash burn of £4.5m, I believe this could be enough to see the business through to break-even.

Should you buy Nanoco?

Consensus forecasts for 2019 put the firm’s shares on a forecast P/E of 15. That seems quite modest, but it’s worth remembering that we don’t yet know how well Nanoco products will sell in the market.

This is too speculative for me, but if you’re comfortable with the risk, I’d continue to hold the shares following today’s figures.

One stock I would buy

I prefer to invest in companies that are already profitable and delivering sustainable growth. One of my favoured stocks in the tech sector is network technology testing and analytics group Spirent Communications (LSE: SPT).

The group’s recent full-year results showed that 2017 was a successful year, despite some customer delays in the US. Adjusted operating profit rose by 27% to $58.9m, while adjusted earnings were 43% higher, at 7.55 cents per share.

Adjusted operating costs were cut by $16.7m, which helped to lift operating margins to 13% and double free cash flow to $56.4m.

Looking ahead at 2018, the outlook remains strong. Consensus forecasts suggest that the group’s earnings will rise by 10% to 8.3 cents per share this year, and then by a further 20% to 10 cents in 2019.

These projections put the stock on a 2018 forecast P/E of 21. The group’s dividend policy suggests to me that a payout of about 4 cents per share is likely this year, giving the stock a forecast yield of around 2.2%.

This isn’t a cheap stock, but it’s one I’d be happy to buy for long-term growth. However, Spirent’s share price has been quite volatile over the last few years. I suspect the best trading strategy here is to buy on the dips.

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