Image source: Getty Images
A penny stock that I like the look of is Revolution Beauty Group (LSE: REVB).
Not all small cap companies can become market leaders or blue chip companies. Many fail due to lack of financial power or are absorbed by larger companies.
However, I think Revolution could grow and provide me with some juicy profits. This is why.
Beauty is in the eye of the beholder
Revolution is a beauty and personal hygiene company that sells multiple brands. It does this directly to consumers and also through wholesalers.
The stock has gone up and down like a thrilling roller coaster ride that I used to enjoy when I was (much) younger. They are currently trading at 24p, which is exactly the same level as this time last year. However, the shares surpassed the 100p mark previously, in 2022, to be specific.
The revolution has been marred by board politics of late, which has likely slowed action. The departures of high-level executives and the growing participation in the fast fashion business boohooIn my opinion, it has been problematic.
With all this going on, it doesn't surprise me that institutional investors want to look at the situation regarding the leadership and direction of the company. Additionally, full-year results for the period ending February 2024 have not yet been released.
The investment case
Continuing with the theme of problems and risks, instability in boards of directors is a concern. This may affect the direction of the business, which could harm operations, profits and investor sentiment. This is something I will follow closely.
Additionally, the beauty market is very competitive and margins are not always the largest, especially with current inflationary pressures. As I mentioned above, a bigger player can take over the business or simply completely overtake it into non-existence.
However, in my opinion, it is not all doom and gloom. Forecasts indicate that the company's first profitable year since its initial public offering is on the horizon in 2021. This could be huge for the business and the stock. However, I am aware that forecasts do not always come true. Additionally, the company has a decent balance sheet, which is always a positive for small caps.
Next, the company has managed to develop a large footprint even though it hasn't existed for a long time. This includes a broad geographic presence as well as key wholesale relationships.
Finally, from a general perspective, the beauty market is a booming market that shows no signs of slowing down according to data giant Statista. This could be good news for the business and its growth aspirations.
what I'm doing now
Looking back at recent events, the overall market outlook, as well as the historical share price performance, I am encouraged by Revolution. I think there is potential for this stock to go much higher.
I would be willing to buy a small amount of shares at just 24p per share when I can and see what happens. I will be marking my calendar for full year results and hope that board unrest is a thing of the past.
