Mega cheap on paper

Investors have been turned off by Venture Life Group (LSE: VLG) in recent months and its share price has slumped. The business manufactures a range of non-prescription healthcare products and demand for its hand sanitisers has slumped in line with global Covid-19 infection rates. This penny stock is now 53% cheaper than it was a year ago.

I think this weakness provides a great dip-buying opportunity though. After all, Venture Life now trades on a forward price-to-earnings growth (PEG) ratio of 0.3. This is inside the accepted benchmark of 1 that suggests a stock could be undervalued.

Acquisitions to fuel growth?

I like Venture Life because of its commitment to expansion and the success of its acquisition strategy. City analysts believe the stock’s earnings will rebound 35% in 2022 and latest financials in January underlined its solid outlook.

Back then, Venture Life said that second-half sales were up 35% from the first six months of 2021. It added that the order book was “significantly ahead” of levels reported a year earlier. I’m also encouraged by its deal with Samarkand Global to sell its oral products like Dentyl mouthwash in China. Disappointing sales from its previous partner there compounded the firm’s woes last year.

Venture Life is a highly cash-generative business and has plenty of liquidity to pursue acquisitions following a revolving credit facility it sealed in mid-2021. An acquisition-led growth strategy can throw up problems like poor sales and unexpected costs later down the line. But as a long-term investor I find its commitment to supercharge profits through M&A very attractive.

Another great dip buy

Assura Group (LSE: AGR) is another penny stock that’s fallen heavily over the past year. Despite a recent recovery, the healthcare property specialist trades at a 6% discount to levels recorded this time last March. I’m also considering snapping it up today.

Assura doesn’t exactly look cheap based on current earnings forecasts. The business trades on a price-to-earnings (P/E) ratio of 21.6 times for the financial year beginning in April. However, its jumbo 4.6% dividend yield is what makes it an attractive buy for me at current prices.

A rock-solid penny stock

I have to say I believe that Assura deserves that premium P/E ratio, anyway. It’s never going to deliver explosive earnings growth — City analysts are forecasting a 6% profits rise in the year to March 2023 — but the ultra-defensive nature of its operations make it a fantastic investment in my book.

Assura develops and then lets out primary healthcare facilities. This is a part of the property market that delivers stable rents at all point of the economic cycle. In fact, demand for such buildings should keep rising steadily as Britain’s population ages and the need for healthcare infrastructure subsequently increases.

Future changes to government health policy could hit earnings one day. But as things stand now, I think Assura is a great buy, and especially for those seeking passive income with dividend shares.

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Healthcare hero

Today, Venture Life Group (LSE: VLG) shares go for 68p a pop. It’s a penny stock I think could make me a lot of money as its transformation strategy clicks through the gears. Venture Life manufactures non-prescription healthcare products such as Dentyl mouthwashes, Procto-eze Plus haemorrhoid creams and Myco Clear fungal nail treatments.

Acquisitions are a key part of the UK share’s growth strategy and last January it made the transformative takeover of PharmaSource BV to boost its product ranges as well as worldwide distribution.

Venture Life has also invested heavily to increase production at its Biokosmes facility in Northern Italy. Capacity here now stands at 250,000 units versus 130,000 previously.

Encouragingly, the UK healthcare share has plenty of financial clout to keep investing in the business and pursuing its M&A agenda. Indeed, a £36m share placing at the end of last year gave it the strength to acquire women’s health and diabetes product specialist BBI in June and a series of oncology support products from Helsinn Healthcare earlier this month.

I’m confident this stock’s aggressive approach to acquisitions could light a fire under long-term profits growth. But remember that an M&A-led growth strategy can be extremely risky. Meanwhile, problems like unexpected costs, underwhelming revenues, and paying over the odds for an asset can be common problems that ultimately damage shareholder returns.

A penny stock that’s too cheap to miss?

XLMedia (LSE: XLM) is another UK penny stock I’m looking closely at for my ISA today. This 58p share operates thousands of websites covering the fields of gambling, sports betting and (more recently) personal finance. And it provides digital marketing services and data to companies in these arenas. All three sectors are growing quickly and this provides plenty of opportunity for the company to exploit.

I also like this UK share because it offers excellent value for money at its current price. City analysts think annual earnings here will rocket more than 600% in 2021. This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of 0.1. A reminder that any reading below 1 suggests a company could be undervalued by the market.

XLMedia is speeding up restructuring efforts in a bid to better address its vertical markets and create a more agile machine. It’s a drive that’s expected to bring down costs by reducing the global workforce by around 15% too.

Now this stock operates in markets which are subject to intense regulatory scrutiny. And this has the potential to take a bite out of earnings if the legal landscape changes. Still, in my opinion, this risk is more than reflected in XLMedia’s ultra-cheap valuation.  

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A UK share for income

Primary Health Properties (LSE: PHP) has a dividend yield of just under 4%, which is pretty good in my book. The £2bn FTSE 250-listed REIT should be a growing source of income, given that REITs have to pay so much of their income out to shareholders as dividends.

What I like about it is there’ll always be a need for healthcare in the UK, and sector professionals can’t just operate from any building.

What’s potentially concerning is that more and more primary care might move online, reducing the need for large GP surgeries. As with all REITs as well, Primary Health Properties has to pay out nearly all profits to shareholders, meaning it doesn’t have the same ability to build up reserves like an investment trust can.

But as a specialist in providing healthcare facilities, its management has solid experience, contacts and specialisation in the sector. It also has government clients that will pay rents whatever the economic conditions.

A reopening share

The recruiter Hays (LSE: HAS) is a value recovery play. The shares are still down 8% from the price at the start of 2020.

That’s despite the shares doing well since the end of last year, when the vaccine breakthroughs boosted value shares and those hit hardest by the pandemic. Hays was certainly in that category.

Despite the last six or seven months of the share price recovering, I think there’s still further to go. That’s why I’m tempted to add it to my portfolio.

City analysts think annual earnings here will rebound 133% in the financial year to June 2022. This shows the future certainly looks far brighter than the past.

The big risk for any recovery share – and Hays would not be an exception – is that any delay to the UK reopening and indeed the full reopening of economies in other territories where it operates would likely hit the share price hard.

Going for growth 

Venture Life (LSE: VLG), is an international consumer self-care company and has brands such as UltraDEX, Rosa calma and Dentyl. It’s a transformation story and the turnaround means I think there could be share price growth for years to come.

Why is that? It’s because the transformation at Venture Life is going well. Final results from March – in a difficult year for companies – showed that revenues and gross profits increased by 49% and 61% respectively. The amount of cash the company holds nearly quadrupled.

Venture Life is launching new products, entering new markets and improving the brands it acquires. All this I think sets it up very well for the future.

What I’d want to keep an eye on is director selling. There has been some significant director selling in the last 12 months, which is a slight concern. It’s also acquisitive, buying up brands. This adds risk that acquired assets might underperform against expectations and also could in theory mean shareholders in future might be asked to cough up more money.

Overall though, I like Venture Life as a growth share, which could boost returns within my portfolio. 

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A UK share with major growth 

The first is Venture Life (LSE: VLG). The company is an international consumer self-care company and has brands such as UltraDEX, Rosa calma and Dentyl.

The company both owns brands and manufacturers for third-parties, giving it some diversification of earnings.

It’s also undergoing a successful turnaround, which I think could add significant shareholder value. Earnings per share went up over 150% from between 2019 and 2020. Revenue and gross profit growth was also very strong, at 49% and 61% respectively.

There’s also plenty of cash, which rose from £10.7m to £42.1m over the last year.

The company made excellent progress with its Dentyl brand, with launches in Boots, Alliance Healthcare, B&M and Bodycare stores. It also started selling in four new markets.

But there are potential risks with adding the shares to my portfolio. As an acquisitive company, the group could overstretch itself in future, or pay for weak brands that it can’t improve. Also, as it has invested in improved manufacturing facilities, these will need to be well utilised, otherwise costs will have increased.

Overall though, I think Venture Life is a UK share with good prospects looking forward.

The loss-making miner digging up nickel for EVs

Horizonte Minerals (LSE: HZM) is a penny share. Its shares trade, at the time of writing, around 7.5p. But its market cap is more than £100m. So what does it do, and could there be big share price growth in the future?

First off, you may not have heard of this smaller company. It is a nickel company that is developing two projects in Pará State, Brazil. The Araguaia ferronickel project and the Vermelho nickel-cobalt project.

According to Horizonte, the nickel market is a $20bn+ per year industry. It is used in electric vehicles (EVs), so is a play on the move to a green future.

Both Horizonte mines have long lives, which should mean they will be productive well into the future. For at least the next two-to-three decades.

A risk with any miner is that the commodity price – in this case nickel – could fall. That could quickly lead to big losses and may mean the company needs to ask shareholders for more money.

While Horizonte talks about ESG credentials because of its products’ ties with electric vehicles, there’s always the potential the share price could be hit by big investors avoiding miners altogether due to external pressures. Institutional investors have become increasingly keen to be seen to be acting with ESG in mind. 

It’s always a bit of a risk investing in a loss-making, pre-revenue company. This is undoubtedly a higher-risk share, but for my well-balanced portfolio, I’d be potentially willing to add it as I expect big future share price growth. I think this could happen if earnings continue to be in strong double figures and investors get excited about the future prospects for both companies. 

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