Today, I’m on the lookout for the best penny shares to buy. And I’ve come across three that City analysts expect to surge in value over the next 12 months.

Here’s why they’re worth serious consideration right now.

Watkin Jones

Watkin Jones (LSE:WJG) is a construction company specialising in build-to-rent homes, affordable housing, and student accommodation. Given the enormous (and growing) shortages in these property segments, the pricing outlook for the company remains highly favourable.

That’s not to say things are totally comfortable right now. Weakness in the UK economy and higher-than-usual interest rates have impacted trading recently. However, the likelihood of sustained rate cuts means sales volumes are tipped to pick up.

Watkin Jones has a strong balance sheet and a decent pipeline to capture these market improvements, too. It had net cash of £80m as of September.

The consensus among City analysts is the builder’s share price will almost double from current levels over the next 12 months, to 55.8p per share.

Premier Miton

Asset manager Premier Miton (LSE:PMI) is also vulnerable in this era of higher interest rates. It’s also a tiny player compared to some of the industry’s other firms, with less financial and brand clout.

Yet, like Watkin Jones, average share price forecasts for the next year are highly encouraging. A 33% rise to 74.2p per share is currently predicted, supported by expected interest rate reductions.

Premier Miton is embarking on widescale cost-cutting to support earnings and offset current market weakness, too. Last month it announced plans for £2m more worth of savings. It’s already achieved roughly £3m worth.

I think this penny stock could thrive over the long term as demographic changes drive investment services demand.

Michelmersh Brick

Michelmersh Brick (LSE:MBH) is highly exposed to interest rate changes and their effect on the housing market. Yet, the broad resilience of homes demand — and the possibility of a pick up when the Bank of England cuts rates — suggests things could be looking up for the building materials supplier.

City analysts broadly agree its share price should surge over the next year. A 59% rise, to 136.5p per share, is predicted. This would clearly take the company firmly out of penny share territory.

The UK’s growing population means a new housebuilding boom looks about to kick off. The government is planning 300,000 new homes each year until 2029.

Michelmersh has financial scope to raise capacity and make acquisitions to better seize this opportunity.

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That can mean the market expects trouble. And looking back over the past five years, we see RWS down a painful 85%. Is this a recovery opportunity, and can the dividend hold up? Let’s take a look.

AI competitive

RWS is in the language translation and support business. That should be sewn up by computers and artificial intelligence (AI), we might think. But there’s a specialisation here in legal, financial, and drug trial documentation. You can’t just take whatever your AI chatbot says and hope for the best — not if you don’t want a whole load of legal risk.

RWS is getting in on AI developments too. And I see a solid opportunity for a combination of its experience and expertise alongside AI automated tools.

But short-term demand has been weak, and RWS posted a 60% drop in first-half adjusted earnings per share in June. The company kept is interim dividend at 2.45p suggesting confidence. And CEO Ben Faes sounded convinced that a technology-led approach will pay off.

My big problem is forecasts show earnings failing to cover the dividend in the next couple of years. So there has to be a chance of a cut. I like the long-term dividend prospects for RWS, but I think investors should consider holding back to see how the next 12-24 months go.

Fund management

The forecast dividend yield at my second pick, AIM-listed Premier Miton Group (LSE: PMI), stands bang on 10%. This also looks like something of a recovery candidate after a several years of profit weakness — and a five-year share price fall of 38%, to 60.3p.

Premier Miton is in the investment management business, which can be very cyclical. And we already see forecasts indicating strong earnings per share (EPS) growth after a low point this year. They see a 3.5-fold EPS rise between 2024 and 2027.

But the same problem raises its head. Those forecast earnings again won’t cover the predicted dividend — expected to remain constant at 6p per share. At least in this case, the company has net cash on its books — £31.2m at 31 March, and forecast to continue about the same.

Keep up the payments?

So I see a good chance the company can afford to keep its dividend going while it awaits the hoped-for uptick in the investment business. That is, unless the board changes its cash-allocation priorities.

And there’s one other risk. Premier Miton is only small, with a market-cap of just £95m. So I see it at a disadvantage to the bigger players in the business. They have the clout to see it through tough times with less pain. And I reckon they’re more likely to retain investor confidence, and win them back, than the small fish in the pond.

Still, I see a strong chance 2025 could mark the turning point. And I rate this one to consider for a longer-term recovery. Eyes peeled for the final dividend.

The post These 2 UK shares priced at under £1 offer huge 10%+ dividends appeared first on The Motley Fool UK.

It’s an investment management company. And faced with high interest rates and shaky economies, investors have been favouring savings accounts, gold, and safer things rather than stocks and funds.

With just £10.4bn in assets under management, this is a sector tiddler. And that has to raise the risk.

But the stock was boosted by first-half results. Profit before tax reached £5.4m, and the company held £31.2m cash with no debt. Also by 22 May, 71% of funds were outperforming their sectors.

There’s a forecast 9% dividend yield, which could be at risk as economic pressures continue. This isn’t the safest penny stock out there. But I’d say the recovery potential makes it worth considering.

Biotech rebound?

Avacta Group‘s (LSE: AVCT) a biotech company specialising in diagnostics and therapeutics. The share price had a couple of good Covid years as the company developed test kits. But that’s long since faded and we’ve seen a five-year fall of more than 75%.

At around 34p, at the time of writing, it’s a penny share on that score. And I don’t think the market-cap’s too far out at £135m. The main problem’s a lack of profit.

With full-year results delivered on 6 June, CEO Christina Coughlin said the company’s oncology technology “has the potential to treat up to 90% of solid tumors by repurposing a range of effective oncology drugs to significantly reduce toxicity and side effects.” But it’s only just moving towards the Phase 1 trial stage.

Results showed a loss from continuing operations of £29m, with cash and equivalents of £12.9m on the books at 31 December 2024.

The likelihood of needing more cash seems high. So it’s a very risky one. But the rewards could be significant. Worth a closer look, I’d say.

Property future

I like housebuilders, but AIM-listed Springfield Properties (LSE: SPR) had escaped my eye. We’re looking at a market-cap of £112m, with the share price a few pennies below the magic pound threshold. It was up over 170p in mid-2021. The forecast price-to-earnings (P/E) ratio’s only 7.5.

Revenue fell 13% in the first half, though some blame was directed at Scottish government delays in affordable housing contracts. Scotland? Oh yes, that’s were this builder lays its bricks.

The report showed higher profits, with a gross margin rising to 17.7% from 14.7%. The company said it has a “large, high quality land bank“. And it added that the “long-term fundamentals of the Scottish housing market remain strong“. Net bank debt fell 33%.

I’d say the smaller focus means more risk than nationwide builders. But if we’re seeing the signs of a new bull run, as I suspect, it could be another cheap stock to consider now.

The post 3 cheap, near-penny shares to consider buying in June appeared first on The Motley Fool UK.

In other words, we’re not simply looking to cash out when a former penny stock hits the big time. Instead, as Fools, we’re looking for long-term investments in quality — but perhaps underappreciated — companies. Here are four of our contributors’ favourites for investors to consider buying right now!

Agronomics

What it does: This investment company focuses on cellular agriculture, precision fermentation, and biomanufacturing.

By Charlie Carman. From deforestation to greenhouse gas emissions to antibiotic use on livestock, there are many problems with conventional farming methods. Agronomics (LSE:ANIC) invests in companies offering innovative solutions to these issues.

The UN predicts that global food output needs to rise 60% by 2050. Novel agricultural developments will be required to meet exploding demand, and Agronomics is well-placed to benefit.

The group has exposure to over 20 companies that produce animal products from cell cultures, such as meat, leather, and dairy. This process removes the need for animal slaughter.

Granted, these nascent biotechnologies carry significant risks. Encouraging mainstream consumer adoption is a major challenge, since many people are reluctant to consume lab-grown meat. There are also regulatory hurdles and trade barriers to contend with.

Despite the risks, trading at 7p today, this penny stock offers a promising long-term investment opportunity to consider in an industry with massive growth potential. 

Charlie Carman does not own shares in Agronomics. 

DP Poland

What it does: DP Poland operates the Domino’s Pizza franchise in Poland and Croatia.

By Ben McPoland. I reckon DP Poland (LSE: DPP) has a lot of promise. As I write, it’s priced at 9p, giving the small enterprise a market cap of £89m.

Admittedly, this penny stock has been drifting in recent years. This is partly because small-cap stocks are out of favour with higher interest rates, but also because the firm is still loss-making. This lack of profitability is a key risk here.

Having said that, losses are narrowing and the market anticipates a first profit next year. The move towards a capital-light, franchise-led model should help things advance from there.

Meanwhile, growth remains decent, with like-for-like sales rising 2.9% and system sales up 6.5% in the first quarter. Revenue is expected to reach nearly £66m this year, which would be 47% higher than 2023.

The company recently acquired rival Pizzeria 105, expanding its footprint into 31 new Polish cities while bringing in 76 experienced franchisees. By 2027, the firm is aiming to operate 200 Domino’s stores across Poland, up from 113 last year, then eventually 500+.

Ben McPoland owns shares of DP Poland.

Premier Miton

What it does: Premier Miton is a UK-based investment firm offering a range of funds and trusts, as well as a portfolio management service.

By Paul Summers. The last few years have been tough for holders of shares in Premier Miton (LSE: PMI). Revenue and profit have tumbled due to volatile markets and low investor confidence, with more people throwing their money into cash accounts as interest rates have climbed. The threat of US tariffs impacting the global economy has only made things worse.

Still, there’s an argument that investors may now look to active managers for ways to outperform the market. Should this be the case, the current valuation of less than 11 times forecast earnings may already offer a good margin of safety.

For those seeking income, there’s also a monster dividend yield of 10%. To be clear, this is at risk of being cut if trading doesn’t improve. So, half-year numbers, due in late May, will be worth checking out. 

But risk-tolerant contrarian investors may find a lot to like here.

Paul Summers has no position in Premier Miton.

Ultimate Products

What it does: Ultimate Products owns a number of brands it uses to sell household goods primarily in its home UK market.

By Christopher Ruane. Ultimate Products (LSE: ULTP) does not strike me as a share for widows or orphans given its risk profile. This year’s interim results showed a year-on-year revenue decline, sharply higher net debt and a reduced interim dividend.

A business model based on manufacturing in the Far East and shipping to Europe has taken hits from higher shipping rates and longer journey times. That means more money needs to be tied up in inventory.

But as the owner of brands such as Salter, the company has a strong offering for retailers and their customers. Demand in such product areas is likely to be resilient over the long term. The British love of a cuppa means that, when most consumers’ kettle breaks, they immediately replace it.

Despite challenges, the company was free cash flow positive in its first half and trades on a price-to-earnings ratio of just 9.

Christopher Ruane does not own shares in Ultimate Products

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The post 4 penny stocks to consider buying while their prices are this cheap appeared first on The Motley Fool UK.

Here are three I’d feel comfortable buying now, spare cash permitting.

Premier Miton

Like its industry peers, fund manager Premier Miton‘s (LSE: PMI) share price is in the doldrums. A 30% fall in 2023 alone is enough to make anyone invested want to throw in the towel.

However, those who subscribe to the view that those in this space could do well as and when confidence returns to the market (and I do), now could be the time to pounce.

While not the lowest valued company in its space, a price-to-earnings (P/E) ratio of 11 remains reasonable.

However, investors shouldn’t be blasé about how tricky things currently are… and might be for a while yet. Premier already announced Q2 outflows of £449m in July, due to investors getting skittish about inflation and the economic outlook in general.

Even so, expectations in this part of the market are so low that it might only take a small chink of sunlight for the share price to rocket.

In the meantime, there’s a potential 7.5% dividend yield to keep me happy.

Tritax Eurobox

A second penny stock I’d be comfortable buying now is warehouse and logistics specialist Tritax Eurobox (LSE: EBOX).

Like its UK-focused big brother Tritax Big Box, this real estate investment trust (REIT) has endured a tough couple of years. In fact, the shares are continually setting record lows.

Realistically, there could be more pain to come if interest rates continue to rise. That’s generally not ideal for any company invested in property and with rising debt on its balance sheet.

Then again, a 37.5% discount to net asset value implies an awful lot of this is already factored in. I also struggle to see how the longer-term outlook isn’t positive. Demand for the sort of assets it owns is only likely to rise due to the ongoing growth of e-commerce.

The monster 8.2% dividend yield is another attraction, although I wouldn’t rule out a cut.

So long as I spread my money around multiple stocks, I reckon the risk/reward trade-off here is now in my favour.

ITV

A final stock I’d be interested in acquiring isn’t, admittedly, a market minnow. It’s broadcaster ITV (LSE: ITV). However, its shares have traded for pennies rather than pounds since March 2022.

Like the other companies mentioned here, things are hardly firing on all cylinders at the FTSE 250-listed firm. A fall in advertising spend by businesses is impacting ITV’s top and bottom lines. Accordingly, analysts are expecting a big reduction in earnings growth in 2023 before things get back on track next year.

And while the company is focusing on expanding its digital services, it will never compete with streaming giants like Netflix. That expansion won’t come cheap either.

But there are some things to like. I’ve long believed the company’s production arm — ITV Studios — to be undervalued by the market. Revenue here rose 8% in the first half of the year.

The passive income stream also appeals. A chunky 7% dividend yield looks safely covered by profit and should be sufficient compensation for being asked to wait for a share price recovery.

The post 7%+ yields! 3 big-dividend penny stocks to consider in September appeared first on The Motley Fool UK.