1 delicious penny stock I reckon can deliver juicy returns and growth

This food delivery penny stock has experienced a surge in performance and uptake recently. Our writer is excited by its future prospects.

| 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.

Young black man looking at phone while on the London Overground

Image source: Getty Images

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.

One food-related penny stock I’ve had my eye on for some time is DP Poland (LSE: DPP). Should I buy some shares?

Pizza purveyor

DP Poland owns the master franchise for Domino’s Pizza in Poland. As a small-cap with a sub-£100m market capitalization, DP’s shares are trading for literal pennies, 10p, to be exact, at present.

Over a 12-month period, the shares are up over 40% from 7p at this time last year, to current levels.

Should you invest £1,000 in Dp Poland Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Dp Poland Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3Dp Poland Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The bull case

The fact DP is targeting, and looks to be succeeding, in an under-penetrated market is appealing. Plus, having the master franchise to one of the biggest pizza brands in the world is a plus point. As well as Poland, the business is venturing into Croatia too. This new avenue could boost earnings as well as potentially returns too.

Next, I’m buoyed by DP’s business model, namely its two main segments. One is its own restaurants, and the other is a sub-franchising model. The latter focuses on selling franchises and it helps set them up, and takes royalties for the pleasure. It seems this modus operandi is working well. Since opening its first store in Warsaw in 2011, it now possesses 116 stores in Poland, and four in Croatia. The business has ambitious plans to have 500 stores by 2030.

It has to be noted that the business is loss-making. This may be a red flag, but many small caps are loss-making for a number of years to start with. The good sign for me with DP is that the losses seem to be shrinking each reporting period.

Another positive for me is the fact that the business is improving gross profit margins. It has done this for the past three years in a row. If it can continue in this manner, I reckon it could be in the black very soon. However, I do understand the past is not a guarantee of the future.

Risks and my verdict

Firstly, Poland has been battling high inflation for some time. In fact, it has previously had one of the highest inflation rates in Europe just two years ago. This makes the firm’s gross profit margin increase even more impressive, if you ask me. However, the longer-term worry is that continued inflation could mean higher costs, tighter margins, and the possibility of a profit being further away.

Next, the business does have some debt to contend with on its balance sheet. This is not usually a worry as most businesses have some form of debt. However, DP recently raised funds through shareholders to pay down debt and also fund growth. As a small cap, it doesn’t have the financial might to stave off financial issues. Higher debt levels and a lack of cash flow in the future could be fatal.

Overall, at 10p per share, and a decent growth record to date, I’d be willing to buy a small number of shares when I next can. I reckon DP could be a shrewd addition to my holdings for future returns and growth.

Should you invest £1,000 in Dp Poland Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Dp Poland Plc made the list?

See the 6 stocks

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.

Sumayya Mansoor 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

Investing Articles

Here’s what Stocks and Shares ISA investors are buying in 2025 to build a second income

Which shares are investors buying right now in the hope of eventually retiring on a healthy second income? Quite a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Oh dear! Warren Buffett says people should only invest in companies they understand

Warren Buffett, the American billionaire, says research is the key to being a successful investor. But our writer thinks it’s…

Read more »

Investing Articles

How much would an investor need in an ISA to earn a £700 monthly passive income?

Ben McPoland digs into some numbers to show how a Stocks and Shares ISA portfolio could eventually throw off a…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Now that’s a surprise! The Lloyds share price went up despite disappointing results

The Lloyds Banking Group share price reacted positively to its 2024 results. Initially, our writer struggled to understand why.

Read more »

Investing Articles

Could this FTSE 250 trust outperform Rolls-Royce over the next 5 years? I think so — and then some!

Our writer believes this US-focused FTSE 250 investment trust could have the potential to beat Rolls-Royce's price performance by 2030…

Read more »

A graph made of neon tubes in a room
Investing Articles

Here’s why the Standard Chartered share price jumped 5% on FY results

Investors have pushed the Standard Chartered share price higher in the past 12 months. Judging by these results, it seems…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

3 little-known UK shares for investors to consider buying

UK shares outside the FTSE 100 and the FTSE 250 don’t get much attention. But there are some quality businesses…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Glencore’s share price is 40% off its highs. Time to consider buying?

Back in 2021, Glencore’s share price was near 575p. Today however, it’s near 330p – around 40% lower. Is this…

Read more »