3 Penny Stocks That Could Keep Soaring In Price

Last Updated October 18th 2021
4 Min Read

Let us start this article by stating the obvious – penny stocks aren’t for everyone! With penny stocks, you pay a trivial amount for a slice of ownership in a very small company that may or may not move forward from where it is. It might take-off and literally go to the moon, it might trade sideways, or it might dwindle to nothing.

Whilst this could, of course, happen with literally any stock you buy, the volatility and unpredictability inherent to small-cap stocks make the ride all the wilder and more unpredictable with penny stocks. As such, if you like the idea of potentially high returns in less liquid markets where you can take a chance on finding the next Google, then penny stocks could be for you.

Here we run through 3 that have recently caught our eye for one reason or another.

  1. Pendragon
  2. Shoe Zone
  3. Science in Sport

Pendragon

Car dealership stock, Pendragon, has seen a sharp reversal in fortunes since last year. With rumours of a merger with rival, Lookers, hanging over the stock last year and depressing its price, today Pendragon looks like a whole different company! After merger talks fell through, Pendragon went back to the drawing board and came up with a coherent and comprehensive plan to relaunch the business.

This essentially involved taking the tough but necessary decision to cut costs wherever possible to return the business to profit. Pendragon have since culled loss-making sites in the UK and laid off about 1,800 staff in an attempt to reduce overheads. It has also put the remainder of its US dealership assets up for sale due to poor revenue performance in this division. The net result of these actions meant that it declared its first half-year profit in three years.

Right now Pendragon is riding high on the combination of a lower cost base and a freshly buoyant car sales market. New car registrations in the UK rose 20.3 per cent in the first eight months of the year, according to the Society of Motor Manufacturers and Traders. One early lesson from Covid has been the enduring popularity of the personal car, as opposed to various car-sharing or renting schemes that have been tried. As such, the new-look Pendragon looks like a penny stock that could go all the way if you are willing to stay with the company for several years ahead.

Shoe Zone

High levels of risk is already built-in when considering penny stocks. As such, many investors see penny stocks as an arena where they can be a bit more contrarian than they would normally allow themselves to be. That is to say, they might bet on a beaten-up and unloved sector making a comeback via penny stocks, whereas they might not want to risk their capital in this way on the main markets.

It’s no secret that retail and the high-street variety, in particular, have taken a pummelling over the past few years. That said, there is some evidence that a new page could be turning here. As such, Shoe Zone could be a great penny stock to buy following its recent price weakness making it even more of a bargain today.

Essentially, budget high-street retailers like She Zone may be in for a flood of new customers as inflation rises and forces more people to economise of necessary goods like shoes. As a penny stock, it is very cheap to take a position in Shoe Zone, and if this argument is correct, Shoe Zone stands to rise strongly over the next 12 months or so.

Science in Sport

Finally, Science in Sport is a protein shake manufacturer that has risen more than 2% in value over the past month. This means Science in Sport is now looking at total 12-month gains of over 111%, and there are reasons to believe the stock isn’t done rising just yet.

Another legacy of Covid has been the rise of home gym sessions as opposed to actually going to the gym. Many young professionals prefer to train at home now, given that their commuting time has most likely fallen dramatically. Science in Sport have cashed in on this lucrative new market, and sales of its products are booming as consumers’ fitness focus boosts demand for its nutritional products. Importantly, Science in Sport doesn’t just sell via the main gym groups, but have a strong direct selling arm, meaning they have not lost out on the declining footfall in traditional gyms.

Revenues at the penny stock jumped a massive 24% in the first half of 2021, and with a pipeline of fresh new products due to be launched soon, the future looks good for this UK penny stock.

Penny Stocks – High Risk, High Reward!

These stocks all have two characteristics – they are cheap, and they have high growth potential. However, no amount of research can foretell all future developments. These stocks should accordingly be seen for what they are – interesting companies who might expand by many multiples, but who will also face great challenges as they grow. If you like the idea of researching small companies with great upside potential, then the UK penny stock universe could be the place for you!

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