A penny share can be one of the most exciting ways to try to make outsized gains in the stock market. Most of them disappoint, of course.
But every now and then, a diamond in the rough emerges and delivers something far more impressive. And right now, Made Tech Group (LSE:MTEC) could be one of those rare exceptions.
What does Made Tech actually do?
As a quick introduction, Made Tech’s a UK technology services business that helps public sector organisations modernise old digital systems and move more of their operations online.
Its clients include government departments and local authorities, which gives the company a handy sticky customer base and a long runway for repeat work. And that business model has caught the attention of one institutional analyst, who’s since placed a 60p share price target on the stock.
With the shares trading at 38p today, that implies a potential gain of 57.9% over the next 12 months – enough to turn £500 into £789.47.
Of course, forecasts should always be taken with a pinch of salt, especially when there’s only one expert giving their opinion. But what makes this analyst so optimistic?
Why the target looks possible
There are two primary factors driving this aggressive forecast. First, the UK public sector’s still badly in need of digital transformation.
Governments continue to face pressure to improve efficiency, cut legacy IT costs, and deliver better online services to citizens. And that creates a large, recurring market for Made Tech’s services, helping boost demand for digital consultancy and implementation.
Second, the company’s been working its way through a period of contract reset and margin pressure, which has weighed on sentiment but may now be creating the conditions for a rebound. And we’ve already seen the penny stock climb over 160% in the past two years as a result.
Needless to say, if contract wins continue to roll in and execution remains disciplined, Made Tech’s top line may continue to expand with earnings following in its footsteps.
That certainly sounds promising. So what’s the catch?
What could go wrong?
Like all penny shares, Made Tech’s still a tiny company. And that means the loss of just a single contract, or a project delayed, can really sting. Having a government as a top customer can provide some security and reliability to revenue, but it’s also important to highlight that public sector spending can nonetheless be quite lumpy.
It’s not just revenue that these potential disruptions can impact. Margins remain a key watch point as well. Delays caused by Made Tech can result in pricing pressure that might drag earnings back into the red.
Still, the combination of a low starting point, a clear recovery narrative, and an institutional price target rooted in non-too-ambitious expectations makes Made Tech a very interesting name to watch.
If the business continues to execute well from here, today’s 38p could indeed be worth mulling.
Should you invest £5,000 in Made Tech Group Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Made Tech Group Plc made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
