Building supplies business

SIG is a specialist building supplies firm that produces products such as insulation, roofing, and other interior products. It has a worldwide presence, supported by its close to 8,000 employees.

As I write, SIG shares are trading for 32p, putting them in penny stock territory. A year ago, the stock was trading for 47p, meaning it has seen a 31% decline over a 12-month period. It is worth mentioning that many shares have fallen in recent months due to macroeconomic headwinds and the tragic events in Ukraine.

Challenges to note

As mentioned above, macroeconomic and geopolitical issues are negatively impacting SIG shares. I believe these same challenges could affect investor sentiment, as well as performance and returns, for some time.

Soaring inflation has led to a rise in the cost of raw materials. For a producer of goods like SIG, this is bad news. Rising costs could put pressure on profit margins. A hike in prices could result in customers looking elsewhere for cheaper alternatives.

Spending on building projects may also slow down. This could have a detrimental effect on SIG’s demand, balance sheet, and returns.

The positives and my verdict

SIG released a half-year report for the six months ended 30 June 2022, which I found to be positive. Revenue, like-for-like sales, operating profit, and margin all increased compared to the same period last year. SIG did point to inflationary pressures but said it was able to mitigate the impact due to its high standard of products and service.

Next, although fears of shorter-term demand issues loom large due to the current volatility, I believe SIG could experience heightened demand and growth longer term. This is because, as a whole, the European construction market is a growing one. A prime example of this is the current UK housing market. Demand is outstripping supply so many house builders are looking to fill this void. SIG’s products are essential for many aspects of construction, so it could benefit here.

Finally, SIG’s insulation products could drive growth for the company. This is because rising energy bills across the world, especially here in the UK, will mean many turn to these products to help with the cost of these bills. SIG could experience increased demand, which could boost performance and returns.

To summarise, I believe SIG could be in line for decent growth in the longer term. Its recent trading update is a step in the right direction. Despite that, for me, there are currently too many ifs and buts linked to SIG’s success, especially in the face of such severe economic volatility. I will keep SIG shares on my watch list for now, but I believe there are better penny stock options for my holdings.

The post Could this falling penny stock be perfect for growth and returns? appeared first on The Motley Fool UK.

Building back up

SIG is a leading supplier of specialised building products throughout Europe. It supplies insulation and commercial interior products as well as exterior and roofing products. Supported by close to 7,000 employees, SIG has approximately 425 sites across the UK, Germany, Ireland, France, Poland, and Benelux.

A penny stock is one that trades for less than £1. As I write, SIG shares are trading for 43p. At this time last year, the shares were trading for 39p, which is a 10% increase over a 12-month period. The shares have increased from 33p to current levels in the past three weeks after positive full-year results were released earlier this month.

FY results and outlook ahead

SIG released positive full-year results earlier this month. It reported that revenue, sales growth, and gross margin all increased compared to 2020 levels. Most importantly, a loss in 2020 turned into an operating profit in 2021 of £41.4m. I believe the share price has rallied on the back of this.

I believe the outlook ahead for SIG is positive. SIG has a large presence and a vast array of products that could boost its performance in the years ahead. The European construction market is booming, and has sped up as part of post-pandemic recovery. This could result in SIG experiencing a rise in demand for its products, in my opinion.

The housing market, especially here in the UK, where demand is outstripping supply, is also good news for SIG, as its products will be required for house builders. I particularly like when a penny stock I am considering operates in a potential growth market.

SIG specialises in insulation products, namely its energy-saving foam-based technology. The current rise in energy bills tells me that demand for insulation products could rise exponentially. SIG could benefit from this.

A penny stock I’d buy

SIG’s performance and shares could come under pressure due to macroeconomic factors, currently in play. The two biggest concerns I have are about rising costs of raw materials and inflation, as well as the supply chain crisis. Rising costs mean profit margins are squeezed. This could lead to a rise in prices, which could drive customers to competitors. Finally, the supply chain crisis is one affecting many industries. A lack of supply of products could slow growth plans and performance ahead.

SIG currently looks like a cheap penny stock option for my holdings. The current risks involved are credible but I like to buy and hold for the long term. In my eyes, the long term could be fruitful with SIG operating with favourable market conditions in a burgeoning sector experiencing high demand for its products. I’d happily add SIG shares to my holdings.

The post This penny stock could be primed for huge growth ahead! appeared first on The Motley Fool UK.

That said, these investments can turn sour very quickly, so I have to keep a close eye on their operations. With that in mind, here are three penny stocks I would buy today for their growth potential. 

Cheap penny stocks 

The first company on my list is the hospitality operator Marston’s (LSE: MARS). After the challenges of the pandemic, it looks as if the business is bouncing back.

According to its latest trading update, sales during the 16 weeks to 22 January were down just 3.6% compared to 2019 levels. However, before the Omicron variant emerged, like-for-like sales in the eight weeks to 27 November were 1.3% above 2019 levels. 

The company is having to deal with some challenges that could hold back this growth recovery. Inflationary pressures could increase costs for the group and customers, hurting sales. 

These numbers appear to show that without restrictions, Marston’s has the potential to return to pre-pandemic levels of sales and profits.

Still, despite this potential, the stock is selling around 30% around pre-pandemic levels. I think this presents an opportunity for long-term investors. That is why I would buy the shares for my portfolio of penny stocks today. 

Building the recovery 

Specialist building products supplier SIG (LSE: SIG) has struggled to earn a profit since 2015. The group has lost more than £400m since 2016. 

Thanks to the booming European construction market, analysts believe this will change over the next two years. The City has pencilled in a group net profit of around £10m for the 2021 financial year and £18m for 2022. 

Yet it looks as if the market doubts the company’s potential. And I will admit I think there is a strong chance it will miss the projections. After five years of disappointment, the company needs to pull out all of the stops to convince the market it is back in business. Inflationary pressures and the supply chain crisis will not help matters. 

Despite these challenges, I would acquire this business for my portfolio of penny stocks as a speculative recovery play. If it can return to the black over the next two years, investors could return to the shares and drive a re-rating of the stock. 

Rising interest rates

Metro Bank (LSE: MTRO) only recently entered the realm of penny stocks. The company was once one of the most sought after businesses on the London market. But after a string of scandals and disasters, the shares have plunged. 

Nevertheless, I believe the outlook for the banking sector as a whole is improving as interest rates start to rise. Higher interest rates will enable lenders to charge borrowers more, boosting their profit margins. 

Metro’s main challenge now is to reduce costs far enough for rising rates to have a material impact on group profit. If costs begin rising faster than interest income, the lender could struggle to return to growth. 

Despite this headwind, I think the combination of the economic recovery and rising interest rates provides a very favourable environment to support the business’s comeback in the next few years. 

The post Cheap penny stocks I’d buy right now appeared first on The Motley Fool UK.

A dirt-cheap penny stock

I’d buy building materials supplier SIG (LSE: SHI), as I think demand for its insulation products could rocket for years to come. A backcloth of soaring energy bills is likely to bolster sales of its heat-preserving products. Growing concerns over the climate crisis also looks set to improve demand for SIG’s energy-saving foam-based hardware.

Housebuilders are being tipped to turbocharge production over the next decade at least to solve the country’s housing crisis. This bodes well for SIG, and particularly as these construction firms put greater focus on the energy efficiency of their products. I do note that a downturn in the housing market, and the subsequent damage this could cause to build rates, could significantly impact SIG’s profits.

I think SIG’s shares could be too cheap for me to fail to act. The business currently trades on a forward price-to-earnings growth (PEG) ratio of 0.2. Investing theory says that any reading below 1 suggests a stock could be undervalued by the market.

Use your noodle

The Restaurant Group (LSE: RTN) is another penny stock I’m paying close attention to today. Even though the pandemic rolls on and we can’t rule out further lockdowns, I think the potential long-term returns here could outweigh the risks. Brits are spending increasingly large portions of their income on eating out and firms like this stand to be big winners.

I like The Restaurant Group in particular because it owns the highly-popular Wagamama noodle chain. Sales here rose a healthy 11% and 8% in October and November compared to the same months in 2019. I’m also encouraged by the improved performance of the penny stock’s other brands like Frankie & Benny’s and Garfunkel’s. Strong trading at The Restaurant Group — allied with the success of disciplined cost-cutting — actually encouraged the business to hike its full-year growth forecasts late last week.

The Restaurant Group is a very different beast to what it was a few years back. Its turnaround plan is bringing hungry customers back in their droves, and I think now could be the time to grab a slice of the stock. But I have to remember that the dining out sector is highly competitive.

Battery-powered profits

I’m also thinking about building my exposure to the green economy. And I believe adding Atlantic Lithium to my portfolio could be an effective way to do this. The company is developing Ghana’s Ewoyya lithium project, which continues to illustrate its exceptional mining potential.

Demand for lithium is predicted to soar over the next decade as electric vehicle production rates increase. Analysts at Statista think global consumption of the battery-making material will rocket to 1.8m tonnes by 2030, up from a projected 497,000 in 2022. As a consequence, I’m thinking profits at Atlantic Lithium could soar. I have to keep in mind that there’s a range of operational problems that could affect a mining company like this, potentially damaging profits. But I’m confident enough to buy the shares for my portfolio.

The post 3 penny stocks to buy in February! appeared first on The Motley Fool UK.

A penny stock on my radar

I have direct exposure to the housebuilding sector through my stakes in Barratt Developments and Taylor Wimpey. I’m considering capitalising on improving construction rates in the UK by snapping up building goods supplier SIG (LSE: SHI) too. This penny stock sells a broad array of essential products like roof tiles, insulation boards and cladding.  

Britain needs to get building over the next decade and the government has set a target of 300,000 new homes a year by the mid-2020s. Companies like SIG will play an essential role in helping the housebuilders meet this goal.

I also believe the rock-solid repair, maintenance and improvements (or RMI) sector gives SIG and its shareholders plenty to be positive about. I’d buy the business to exploit this opportunity, even though supply chain problems poses a danger to profits in the nearer term.

Making money from the inflationary boom

Recent inflation news convinces me that grabbing a slice of some gold-producing stocks could be a good idea. Inflation gauges from the US and UK showed prices rising at 39- and 10-year highs respectively. Data more recently from the eurozone showed consumer prices increasing since the economic bloc began in 1999 as well.

Gold prices rise when inflationary pressures grow. This is why I’m considering buying Ariana Resources (LSE: AAU) today, though it’s not the only reason why.

I’m also encouraged by the slew of positive drilling updates from its Turkish assets (and from Mediterranean-focussed miners in which it’s invested) in recent months. I’d buy Ariana despite the threat that gold prices could fall if, for example, the US dollar were to strengthen.

A next-gen food share

Concerns over animal welfare and the environmental impact of livestock farming have fuelled a sharp rise in vegan and vegetarian diets in recent years. This has led to an explosion in the number of non-animal products being manufactured and sold all over the globe.

It seems that the growing popularity of meat alternatives is set to keep running too. Analysts at Expert Market Research think the global vegan food market will be worth $26.1bn by 2026, up from $15.4bn last year.

I’m thinking of buying Agronomics shares to make money from this trend. This company has invested in a selection of fledgling producers in the field of lab-grown meat. Okay, these sorts of products aren’t strictly ‘vegan’. But sales are tipped to take off as people seek to get their protein in other ways than from animals. I’d buy the business even though one or more of the assets it’s spent cash on could fail to deliver on their exceptional promise.

The post 3 of the best penny stocks to buy in 2022! appeared first on The Motley Fool UK.

But the share has since fallen back to where it was a couple of months ago. So, could this again be a dip-buying opportunity for my own portfolio?

Well-known player in booming market

The penny share in question is SIG (LSE: SHI). It’s up 38% over the past year, at the time of writing this article Monday. The company provides building materials to contractors in various European markets. It is best known for its specialisation in insulation. It has had a very challenging few years. The pandemic affected sales, but the company already looked fragile to me even before that. Last year there was a rights issue. That came little more than a decade after SIG had considered a rights issue in the aftermath of the last financial crisis. So it seems to me that SIG has some challenges in terms of business demand across the economic cycle. When custom drops off, the company seems to be underprepared.

However, since its problems last year, SIG has been building back to a position of strength. In a trading update last week, the company said that it had continued to trade ahead of expectations in its fourth quarter. That is encouraging news and bodes well for the full-year results at SIG. A full-year trading update is scheduled for 11 January.

Last month the company tapped the debt markets to refinance itself. That should help it streamline its balance sheet, as well as provide funds to help the company grow. Several directors bought shares in the company last month. They paid 49p or 50p, higher than yesterday’s SIG share price.

Why I like this penny share

SIG has historically had periods of considerable success. It understands the insulation market well.

I see a couple of growth drivers for insulation in Europe in coming years. First, in markets such as the UK, there continues to be a housing shortage. That is leading to extensive construction of new homes. That will provide high demand for materials including insulation.

On top of that – and potentially even more importantly, in my opinion – many European governments are pushing insulation as part of their environmental strategy. Greater use of insulation could be one way to reduce energy use, including in older buildings. I think that will lead to sustained demand for insulation materials, and some of it may not be very price sensitive if it is government-mandated.

I do see risks here, too. Supply chain costs and labour costs have been increasing sharply in many markets. That could lead to higher costs, which might reduce SIG’s profitability. I also think the rights issue last year is a reminder that any future downturn in building activity could again threaten liquidity. That might lead to further shareholder dilution.

But as a leading player in a market with strong demand, I think the next several years could see a growing SIG share price. I would consider adding the penny share to my portfolio.

The post This penny share is up 38%. I’d buy appeared first on The Motley Fool UK.

SIG provides insulation, roofing, interior, and exterior products alongside a raft of other construction-related goods. It’s therefore in one of the best seats to exploit rising homebuilding rates in its European markets (and especially in the UK). What’s more, this cheap UK share is also benefitting from healthy conditions in the renovation maintenance improvement in its domestic and overseas territories. I expect these markets to remain robust for years to come too.

Profits at SIG could take a significant whack if supply chain issues cause product shortages and drive costs higher. But I think the penny stock’s sinking share price more than reflects this growing threat.

Another dirt-cheap penny stock

It seems as if the British economy could be set for a long and rocky recovery following the Covid-19 crisis. It’s a prospect that could damage the profitability of cyclical stocks like structural steel manufacturer Severfield (LSE: SFR). But as a long-term investor I still think the business is an attractive buy and particularly following recent heavy selling of its shares. This penny stock trades on an ultra-low forward price-to-earnings ratio of 9.4 times and boasts a big 4.4% dividend yield.

Trading at Severfield has comfortably beaten expectations in recent times. Indeed, its order book in the UK and Europe stood at record levels of £376m as of 1 September, giving the company decent earnings visibility for the next 12 months and beyond. I’d use recent share price weakness as an opportunity to buy this solid (and cheap) UK share.

Even better value for money?

The Raven Property Group (LSE: RAV) share price has headed in the opposite direction to Severfield’s in recent weeks. This penny stock specialises in providing warehousing space in and around various Russian cities (as well as some office space in St Petersburg). It’s therefore an indirect beneficiary of the recent rise in gas prices, a phenomenon that’s boosting economic conditions in Russia.

Despite these gains, however, Raven Property Group shares still look mighty cheap today. The property powerhouse trades on a dirt-cheap P/E ratio of just 4.1 times. It’s a reading that, in my opinion, fails to reflect the rate at which e-commerce is growing in Russia and how this could supercharge demand for the company’s warehouses. Statista think online retail in Russia will be worth $34.8bn by 2025, up $6.4bn from 2021’s projected total.

I’d also buy Raven Property Group because of its inflation-beating 5.2% forward dividend yield. The business may fail to capitalise fully on its excellent market opportunities if it fails to secure decent assets for its property portfolio. Still, right now things are looking extremely bright for this penny stock.

The post Penny stocks: 3 of the best cheap UK shares to buy right now! appeared first on The Motley Fool UK.

What does Kanabo do?

Kanabo is a stock specialising in medical cannabis while developing and manufacturing a CBD-based range of products.

Long term, it hopes to build a recurring revenue business model selling a varied assortment of unlicensed medical oils for use with its medical-grade vaporisers. This could be a potential money-spinner but I think it will take a long time to reach this point.

The company is based in Israel and its founder and CEO Avihu Tamir has extensive experience in working with medical cannabis patients. This inspired his vision to create a medical vaporiser for patients that would start to combat the negative effects of smoking cannabis or tobacco-cannabis mixtures.

Would I buy KNB shares?

The Kanabo share price is up slightly today from its Friday close, after the company announced it’s taken a £750k stake in Hellenic Dynamics. This is a Greek medical cannabis cultivation company, which is expected to publicly list in London soon via a reverse takeover. It raised the money for this stake via a share placing of 4.5m shares at 22p each. This may be a profitable move, but issuing new shares so soon after IPO may not please all investors.

It’s also begun implementing partnerships to produce and distribute its products, plus it’s awaiting certification on its VapePod device. These things take time so it could be another year before it’s reporting news that boosts the Kanabo share price.

I’m interested in investing in the growth of the cannabis market. But I think the KNB share price could have further to fall in the short-term, therefore I’ll keep it on my watch list for now.

Cashing in on the construction boom

Another London-listed penny stock I’ve been looking at is SIG (LSE:SHI). It supplies insulation, roofing, commercial interiors, and specialist construction products. The construction industry is booming today and demand for these products is high.

SIG is in the FTSE-All Share index. It has a £691m market cap, and earnings per share are negative. It also cancelled its dividend last year, although it hopes to reinstate it.

The company continues to see growth across Renovation Maintenance Improvement (RMI) in housing and construction throughout the UK and France. But the evolving pandemic backdrop continues to create uncertainty in the near term. As does the risk of inflation.

The SHI share price is currently down 53% from its pre-pandemic price, so there might still be upside for patient shareholders. Unfortunately, it’s been a very volatile stock over the past decade with several prolonged downward price trends. This discourages me from investing at what could be a high price point. From January to April 2021, group sales fell 4% compared to 2019. I think this is discouraging. Overall, I’m not drawn to invest in SHI shares today, there are other stocks I’d prefer to buy.

The post Should I buy these 2 penny stocks? appeared first on The Motley Fool UK.

There is more than just the property sector that slots them together. A few days ago, both stocks touched one-year highs. The Bellway share price touched almost £35, an increase of 77% from a year ago. The SIG share price increased similarly, about 76%, touching 44p.

As an investor, I now want to know if I should buy these stocks, or wait for their share prices to fall further. In other words, are they bargain buys or are their prices high?

I think there is much evidence to indicate that these UK shares could continue to see robust growth ahead. 

Consider this. 

Buoyant property sector

Even with some initial signs of cooling off, house prices in the UK are showing robust growth. As per the latest government data, they rose by 7.5% in January compared to the year before.

Supportive policies like the mortgage guarantee scheme and extension of the stamp duty holiday could keep the housing market going for much of this year. 

Additionally, the economic rebound due to occur as the lockdown ends by the middle of 2021 could fuel demand further. 

Both companies had a positive outlook in their recent updates. Bellway talked of a “robust forward sales position” earlier this week when it released its update for the half-year ending 31 January 2021. 

SIG expects a “return to profitability” in the second half of the year, as per its full-year 2020 results, also released earlier in the week. The company flipped into losses because of the hit from the initial period of the pandemic. 

Competitively priced UK shares

Also, despite the sharp increase in share prices, neither of these UK shares is particularly pricey compared to peers. For instance, Bellway, has an earnings ratio of around 22 times, which is comparable to that of another FTSE 250 builder, Vistry Group.

Similarly, SIG is competitive too, though the earnings ratio cannot be applied in this case because of its losses last year. I looked at price-to-sales instead, which is at 0.2 times for it compared to flooring products provider James Halstead at 4.5 times.

I think this indicates that their share prices can increase more. This will be particularly so as they inch back towards their pre-pandemic performance levels.

My concern

I do have one big concern about the property market though. At present, it is held up by policies, but once these are withdrawn, there may be a slump in the market. Strong order books indicate that their 2021 numbers may be less impacted, but the year after could look shaky again. 

What I’d do about these UK shares now

I guess we will have to wait and watch how things go. But there is much to be positive about too. Forecasters see a sharp economic rebound, which can negate any potential slump. I do like Bellway better than SIG right now, though. Not only has it performed better during the pandemic, I am saying this keeping SIG’s past performance in mind too. 

The post At near 1-year highs, are these 2 UK shares bargain buys for me? appeared first on The Motley Fool UK.

I reckon that the SHI share price can continue to rise at speed, and can even double from the current levels. There are three reasons for this:

#1. Positive trading update

In its trading update, released earlier today, SIG reported “solid recovery” for the second half of the year. The recovery was also “ahead of… previous expectations”. It also posted a confident outlook for 2021, stating that it expects both organic revenue growth and market share gains. Investors responded positively to the update, making SHI a big gainer in today’s trading. 

Considering that its share price is still less than one-third of where it was pre-pandemic, it’s not a stretch to think it can make big gains from here. In fact, it has already doubled once in the past year, in the months following the stock market meltdown. 

#2. Stock market rally continues

Overall investor optimism has also helped in buoying the SIG share price. And there’s reason to believe that the stock market rally can continue.

A Brexit deal, successful development of the Covid-19 vaccine, and the fact that the FTSE 250 is still below where it was one year ago are positive indicators. 

#3. Policy support for the FTSE 250 stock

British property markets have also received a great deal of government support during the pandemic. It is likely that this may continue. Since SHI is a supplier of construction products like insulation and roofing, it can benefit from the uptrend in real estate as well. 

Moreover, over 60% of SHI’s revenues come from Europe-ex UK. The UK makes up for the remaining. In this context, a no-deal Brexit would have been a big challenge for the company, but that has now been successfully averted. 

Should I buy this FTSE 250 stock?

The big question now is whether I should buy this FTSE 250 stock. That depends on my investing horizon. In the short to medium run, SIG indeed looks likely to make gains. However, we at the Motley Fool are advocates of long-term investing. To that extent, I think there are a few points to consider:

• Even before the pandemic, SIG’s revenues were falling annually. Its share price increases may not be sustainable on an eroding financial base.
• Brexit-related challenges can show up in the movement of goods between the UK and EU. If this exacerbates, I reckon it will impact the likes of SIG, with big business interests in the continent. 
• If the lockdown continues, as does the damage to the economy, property markets may suffer in the months to come especially as policy support is withdrawn. SIG is vulnerable to these potential challenges. 

Ultimately, whether I buy this FTSE 250 stock will depend on whether or not I think the broader environment, at the very least, is in its favour or not. I do think that the assessment needs to be made carefully. 

The post 3 reasons why I think this FTSE 250 share’s price could double soon appeared first on The Motley Fool UK.