This isn’t to say there aren’t a few winners out there, particularly after the year we’ve had on the markets. Here are three one-time penny stocks now requiring me to dig a bit deeper in my pockets.

Trading “materially ahead”

Market minnow Epwin (LSE: EPWN) manufacturers extrusions, moldings and fabricated low-maintenance building products. That may sound deadly dull, but I don’t think those buying the stock a year ago will be complaining. The share price has climbed nearly 70% since then. 

Back in July’s trading update, the company said revenue over the first half of 2021 had been 69% up on 2020. That’s not altogether surprising considering how bad things were last year. However, the £157.8m logged was also 13% ahead of 2019’s figure. Accordingly, management now expects full-year adjusted pre-tax profit to be “materially ahead” of previous expectations. 

However, there are still risks ahead. Supply chain issues and inflation are impacting a lot of businesses right now and Epwin’s no exception. So far, it’s been able to navigate these headwinds, but things could get worse before they get better.

Then again, the shares are still trading at a reasonable valuation price of 17 times forecast earnings for me to consider buying now. A 2.9% dividend yield easily covered by profit is another positive for me. 

Robust demand 

SigmaRoc (LSE: SRC) is another former penny stock whose shares are now trading (just) over a pound. Like Epwin, the construction materials company has clearly benefited from the revival in property over the last year. Its share price is up almost 140% since August 2020. 

Bar a prolonged market stumble, I can see this momentum continuing. Back in May, the company announced that trading had been “ahead of internal expectations“, thanks to strong private-sector demand and some large-scale infrastructure projects commencing. Since management will always be closer to the business than analysts, I take this as a buy indicator when looking for stocks for my own portfolio.

SigmaRoc has also been on an acquisition spree, buying three businesses in Belgium. More recently, it’s announced a reverse takeover of limestone developer Nordkalk for approximately €470 million. 

Half-year numbers are due on 6 September. In the meantime, the shares trade on a valuation of 19 times forecast earnings. One potential downside however, is the lack of dividends. 

Former penny stock

A final former penny stock worth mentioning is Sirius Real Estate (LSE: SRE). The company is a leading owner and operator of offices, business parks and industrial complexes in Germany.  The FTSE 250 member has also proven itself to be a great investment. The shares are up 63% over the last year. 

Of all three one-time penny stocks mentioned, SRE is probably the one I’d prioritise buying due to its arguably more diversified earnings stream. That said, it’s also the most richly valued, potentially making it riskier. A valuation of 24 times forecast earnings suggests quite a lot of good news might be priced in.

Having said this, I do wonder if there could be more upside ahead as people gradually return to their offices. Sirius seems confident, having recently snapped up four business park assets and one land parcel for around €85m. The shares also yield 2.9% this year, according to analyst projections. 

The post 3 former penny stocks now trading for over a pound! appeared first on The Motley Fool UK.

A long-term tech winner?

My first pick is Calnex Solutions (LSE: CLX). This Scottish technology business makes specialist testing and measurement equipment for telecoms networks. Calnex was founded by chief executive Tommy Cook in 2006 and floated on London’s AIM market in October 2020.

Cook retains a 21% shareholding, so his interests should be well-aligned with those of shareholders.

I’m normally quite cautious about newly-floated businesses. But I’ve been impressed by what I’ve learned about Calnex so far. I think this growth stock could be a long-term winner.

Firstly, I think demand for the company’s network emulation and network synchronisation should continue to grow for the foreseeable future. Management says that 5G and cloud computing are driving “growth in the need for test and measurement” solutions. I don’t see this trend changing anytime soon.

The other reason why I like Calnex is that it’s already highly profitable and well financed. Results for the 12 months to 31 March showed revenue jumped 31% to £18m, with pre-tax profit up 22% to £3.6m. Calnex generated an operating profit margin of 21% during the year and reported net cash of £12.7m at the end of March.

Of course, Calnex isn’t a sure thing. With a market-cap of £85m, this is still a small company that’s new to the market. My main worry is that the company’s strong growth may slow. Analysts are expecting profits to be much flatter this year before returning to growth in 2022. But there’s no guarantee of this.

Even so, I like what I’ve seen of Calnex. The price tag of 25 times forecast earnings doesn’t seem too high to me for a growing company, with profit margins of more than 20%.

This is a stock I’d buy today and tuck away for a few years.

A growth stock with a moat?

My second company is construction materials group Sigmaroc (LSE: SRC). This may not sound like a classic growth situation, but hear me out.

Sigmaroc’s focus is on buying established local companies which already have a good share of their local market. Examples include stone quarries and concrete and block manufacturers. Products like this are generally made and sold as locally as possible, because they’re heavy but cheap. This means long-distance transport adds a lot to the cost of the item, giving locally-produced alternatives an inbuilt advantage.

Sigmaroc’s revenue rose 77% to £124.2m last year, thanks to continued growth and acquisitions. Underlying pre-tax profit for the year rose 45% to £12.2m.

The main risk I can see is that ‘buy-and-build’ models — where a company uses regular acquisitions to expand — can be risky. An economic slump could also hit demand from the construction trade.

No growth stock is without risk, but Sigmaroc’s a business I’d be happy to keep buying. Although the shares look pricey on 20 times 2021 forecast earnings, the company’s latest trading update reported continued like-for-like growth. I think this is a business that could get much bigger.

The post The best growth stocks to buy with £2,000 in July appeared first on The Motley Fool UK.