What I’d do about these 2 high-performing penny stocks now

These penny stocks have shown a sharp bounce back from the stock market crash. But does their future look equally good or will their price trends diverge?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Last May, UK shares were still reeling from the impact of the stock market crash. Because bears ruled the day, their share prices were still quite low. But one year later, they have recovered quite a bit and that includes many penny stocks. 

N Brown shows sharp share price rise

One of them is the penny stock N Brown (LSE: BWNG), which is up 283% over the year. Yet its share price is still way below the highs at which it started 2020. 

Considering that the UK lockdown easing is in full swing and the outlook for the consumer economy is full of optimism, it would appear that N Brown’s prospects are brighter now.

Consider pre-crisis trends

But I would take a step back before assuming this. The fact is that unlike other FTSE stocks, this penny stock started falling way before any stirrings of the stock market crash were visible. In January 2020 alone, its share price lost half its value. 

This can be correlated with its weak performance even pre-2020. Its first update in 2020 was for the 18 weeks ending January 4 2020, when it reported a 5% revenue decline. This followed a 5.4% fall in its half-year report earlier in 2019. It had also already seen a double-digit debt increase. 

Weak financial performance

After the coronavirus crisis of last year, it is no surprise that it is in an even weaker position. But I think that the clothing and homewares provider can begin to recover from here, going by the apparent pent-up consumer demand. At the same time, I would like to see that in its numbers before buying the stock. If it continues to stay weak despite a strong economy, I am not sure I can bet on its recovery. 

Angling Direct posts strong results

At the other end of the spectrum is fishing equipment retailer Angling Direct (LSE: ANG) that reported fantastic full-year results for the year ending January 31 earlier today. Its revenues were up 27% and pre-tax profits were up a whole 279%, more than wiping out the losses from the year before.

Its financial year 2022 has also started strong. Additionally, its share price is robust, but still below all-time-highs seen in 2018. It has a price-to-earnings (P/E) ratio of around 26 times after its latest results, which in the present investing environment suggests to me that its share price can rise further. 

It is a relatively illiquid stock, so buying and selling it may be less easy than that for big FTSE 100 stocks. Its share price performance has also been somewhat erratic overtime, though it is up 45% in the past year. 

The upshot

Overall, I think that its financial performance in a year when retailers were challenged is noteworthy. It has upgraded its online platform, opened four new stores and is looking to expand in new markets in Europe. It is a buy for me. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »

Young black man looking at phone while on the London Overground
Value Shares

After a 16% drop, FTSE 100 stock JD Sports Fashion looks like a steal to me

This FTSE 100 stock has tanked since mid-September. Edward Sheldon believes that there's value on offer after the share price…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Is now the time to buy BP shares? Here’s what the charts say

The best time to buy shares in a company is when they’re trading at a discount. But the future is…

Read more »

Investing Articles

Here’s how I’d use £50K to aim for a million when the stock market crashes

Seeing a stock market crash as a buying opportunity could prove lucrative for a well-prepared, long-term investor. Christopher Ruane explains…

Read more »