I fancy buying some top-quality penny stocks in a Stocks and Shares ISA today. Here are two low-cost UK shares on my radar right now.
A penny stock that’s poised to fly?
I think Ryanair (LSE: RYA) is a highly-attractive penny stock buy if an investor is prepared to swallow a little risk. The dangers to UK airline shares are perhaps obvious as the public health emergency drags on and travel restrictions persist.
In the 12 months to March, this particular operator moved just 27.5m passengers, down from 149m a year earlier. Worryingly, Ryanair has warned that traveller numbers in this fiscal year are leaning towards the lower end of a guided 80m-120m too. This is due to the third wave of coronavirus infections currently sweeping across the company’s core European regions.
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More downgrades could be in store too as the slow vaccine rollout on the continent continues and infection numbers subsequently continue to rise.
As a long-term investor though, I think Ryanair still has plenty to offer me. I buy UK shares with a view to owning them for at least a decade. And over this sort of timeframe, I think the Irish flying ace will deliver excellent shareholder returns. First and foremost, Ryanair has a big wad of cash to help it ride out the crisis.
The rate at which it is burning through cash continues to come down, thanks to strict cost cutting too. Not only should this assuage any fears over its survival, but its strong balance sheet should help the penny stock ramp up capacity when the pandemic finally passes.
The market outlook for cheap plane tickets remains extremely bright over the medium to long term. And Ryanair has the tools to make the most of this exceptional opportunity.
On a roll
I’m also tipping Accrol Group Holdings (LSE: ACRL) to thrive despite the uncertain economic environment. Without labouring the point, it’s my opinion that this UK penny stock — which manufactures toilet rolls and kitchen rolls — has one of the most stable businesses out there.
This isn’t the only reason I’m a fan, though. Private label manufacturers in these markets are grabbing market share at a heck of a pace from branded manufacturers as value becomes more and more important. And Accrol is expanding to make the most of this opportunity. The company acquiring wet wipes producer John Dale earlier this month for £3.9m.
A word of warning though. Paper prices have soared over the past year. It’s a problem that could seriously eat into this penny stock’s margins now and in the future. On top of this, Accrol also sells its product to a small number of key customers. This leaves it in danger of a severe revenues shortfall if one of these clients opts to switch supplier.
