NEWSLETTER
Image Source: Getty Images
Investing in penny stocks can be a great way to find hidden opportunities that are under the radar for most investors.
While these companies may carry additional risks, many of them are large, well-established companies in real life; They are small by stock market standards.
Today, I want to look at penny stocks that look like a decent value to me right now.
a strong twist
construction and engineering group costaine (LSE: COST) specializes in infrastructure projects in sectors such as highway, rail and water. It is my hope that the long-term nature of this work means that Costain will be less affected by an economic downturn than companies focused on commercial construction.
That’s not to say that Costain hasn’t had problems. Just before the pandemic, the company suffered £90m losses on two large contracts gone wrong.
Then the pandemic caused more problems as some construction activities stopped. To stay afloat, Costain was forced to raise £100m from shareholders in 2020.
However, the group’s current management was not responsible for these issues and has made changes to make them less likely to happen again in the future. The business now seems to be doing well.
Costain’s latest results showed a 40% increase in pre-tax profit for the six months to June 30. CEO Alex Vaughan said bidding activity remained strong, especially on highway and rail projects.
The order book stood at £2.7bn at the end of June last year and the company said 90% of its revenue for the remainder of 2022 was already secured.
City analysts who cover Costain shares have recently raised their earnings estimates for the company. However, the stock is currently trading with an expected 2023 price-earnings (P/E) ratio of just 4.3, which is unusually low.
The 2022 results will be published later this month and should include an update on the outlook for this year. If the numbers are in line with expectations, I think the stock could perform well. In my opinion, this could be a good buying opportunity.
An overlooked bargain?
My Next Pick also operates in the construction sector, but it’s quite different. severfield (LSE: SFR) is one of the UK’s leading producers of structural steel. This is used for large commercial projects such as office blocks, data centers, and warehouses, as well as transportation and other infrastructure.
It said its order book stood at £464m at the start of November, which is the equivalent of around a year’s revenue. The company also said that the pipeline of new opportunities was still in progress. “consistently high levels”.
Group pre-tax profit rose 17% to £12m between March and September last year, compared to the same period last year. The interim dividend increased by 8%, putting the stock on track to generate a dividend yield of 5.5% this year.
I’ve been following Severfield’s progress for a while now and haven’t found any major issues.
At current levels, the stock is trading with an expected 2023 P/E ratio of seven times earnings. That seems reasonably cautious to me. If trading is flat this year as expected, I think that the stock could do quite well from this level.
var config = {
apiKey: ‘1ed121d592e04642d57912bb369ef696621661a3’,
product: ‘PRO_MULTISITE’,
logConsent: false,
notifyOnce: false,
initialState: ‘NOTIFY’,
position: ‘LEFT’,
theme: ‘DARK’,
layout: ‘SLIDEOUT’,
toggleType: ‘slider’,
iabCMP: false,
closeStyle: ‘button’,
consentCookieExpiry: 90,
subDomains : true,
rejectButton: false,
settingsStyle : ‘button’,
encodeCookie : false,
accessibility: {
accessKey: ‘C’,
highlightFocus: false },
onLoad: function () { // hide Cookie Control recommended settings button.
var recommendedSettingsButton = document.getElementById(‘ccc-recommended-settings’);
if (recommendedSettingsButton) {
recommendedSettingsButton.classList.add(‘hide’);
} },
text: {
title: ‘Privacy Notice’,
intro: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
necessaryTitle: ”,
necessaryDescription: ”,
thirdPartyTitle: ‘Warning: Some cookies require your attention’,
thirdPartyDescription: ‘Consent for the following cookies could not be automatically revoked. Please follow the link(s) below to opt out manually.’,
on: ‘On’,
off: ‘Off’,
accept: ‘Accept’,
settings: ‘Cookie Preferences’,
acceptRecommended: ‘Accept Recommended Settings’,
notifyTitle: ‘Privacy Notice’,
notifyDescription: ‘This site uses cookies, pixels, and other similar technologies to improve your web site experience and to deliver you personalised ads about our own and third party products and services. Please read more about how we collect and use data about you in this way in our Cookies Statement in our Privacy Policy. You can change your cookie settings in your browser at any time. ‘,
closeLabel: ‘Save Preferences and Close’,
accessibilityAlert: ‘This site uses cookies to store information. Press accesskey C to learn more about your options.’,
rejectSettings: ‘Reject All’,
reject: ‘Reject’,
},
branding: {
fontColor: ‘#fff’,
fontFamily: ‘Arial,sans-serif’,
fontSizeTitle: ‘1.2em’,
fontSizeHeaders: ‘1em’,
fontSize: ‘1em’,
backgroundColor: ‘#313147’,
toggleText: ‘#fff’,
toggleColor: ‘#2f2f5f’,
toggleBackground: ‘#111125’,
alertText: ‘#fff’,
alertBackground: ‘#111125’,
acceptText: ‘#ffffff’,
acceptBackground: ‘#111125′,
buttonIcon: null,
buttonIconWidth: ’64px’,
buttonIconHeight: ’64px’,
removeIcon: false,
removeAbout: false },
necessaryCookies: ( ‘wordpress_*’,’wordpress_logged_in_*’,’CookieControl’,’PHPSESSID’,’fivc’,’fivs’,’fivp’,’Ookie’,’Fool_subinfo’,’_gads’,’_gid’,’_gat’,’_ga’,’__utma’ ),
optionalCookies: (
{
name: ‘Sharing’,
label: ‘I would like content tailored to my personal preferences.’,
description: ‘We work with advertising partners to show you ads of products and services you may be interested in. You can choose whether or not to have ads delivered in a personalised way by setting this option. You can return to review this setting at any time by clicking the "C" logo in the bottom left corner of any page.’,
cookies: ( ‘_ga’, ‘_gid’, ‘_gat’, ‘__utma’, ‘_gads’ ),
onAccept: function () {
// Add Facebook Pixel
!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=();t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)(0);
s.parentNode.insertBefore(t,s)}(window,document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘901682110316659’);
fbq(‘track’, ‘PageView’);
fbq(‘consent’, ‘grant’);
// End Facebook Pixel
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, true ) ;
},
onRevoke: function () {
fbq(‘consent’, ‘revoke’);
// Enable Google ad personalization
// gtag (‘set’, ‘allow_ad_personalization_signals’, false ) ;
},
recommendedState: ‘on’,
lawfulBasis: ‘consent’,
},
),
statement: {
description: ”,
name: ”,
url: ‘https://www.fool.co.uk/help/privacy-and-cookie-statement/’,
updated: ”
},
};
CookieControl.load(config);
