The Alternative Investment Market (AIM) was once regarded as being akin to the Wild West due to the dubious quality of many of the companies listed on it. Today, it’s a different story. Many AIM stocks are well run and making great money. The carnage seen in markets this year also means prices are a lot more palatable than they once were.
Here are three I believe are worthy of investment this month.
Team 17
A market darling during the pandemic, indie video game developer Team 17 (LSE: TM17) is now very much unloved. The AIM stock’s share price has halved in 2022 to date. Personally, I see this as an opportunity.
Back in March, the company announced record results. Following the release of 12 new games in 2021, revenue rose 9% to £90.5m. Pre-tax profit was up 11% to £29.1m.
A risk with any developer is that what they produce has no guarantee of proving popular. Moreover, the rise in the cost-of-living combined with wage inflation is expected to increase costs this year by roughly £1.7m. Revenues are also expected to be hit by around £4m due to the Ukraine/Russia war.
However, the balance sheet looks strong and a number of recent acquisitions are expected to be “immediately earnings accretive” in 2022.
At 17 times forecast earnings, I think Team17 looks a great buy.
SDI
Scientific and tech product producer SDI (LSE: SDI) is an AIM stock I’ve had on my watchlist for some time now. The reason I haven’t been buying is that the valuation has always looked full. However, the company is now getting much closer to entering my ‘buy zone’.
Sure, it’s still not cheap. The shares currently change hands for 19 times earnings. So there’s a chance we might not have seen the bottom yet if economic fears worsen. There’s also no dividend stream to compensate me while I await a recovery.
Full-year numbers are due on 18 July. Based on its most recent trading update, I think these should be pretty stellar. A couple of months ago, SDI said revenues and profits were expected to “materially exceed current market expectations“. Not many businesses are saying that right now!
Consequently, I’d be comfortable buying now.
Strix
A final AIM stock I think is worthy of investment in Juy is one I already own: kettle safety control supplier Strix (LSE: KETL). This is despite seeing all my paper profits evaporate in 2022. The shares are down almost 45% this year.
Still, the fact that I’m a long-term investor means my glass is always half-full. Having arguably got a little frothy last year, the company’s valuation has now returned to a more reasonable level. Shares now trade at 11 times forecast earnings and come with a 5.2% dividend yield.
In May, Strix announced it was “maintaining expectations for the full year“, based on trading in 2022 so far. Product price increases across its entire range have been “successfully implemented” in the face of higher inflation. And manufacturing operations in China have not been severely impacted by the resurgence of Covid-19. That doesn’t exactly sound like a company in crisis to me.
I’m very tempted to top up at this level.
