Penny stocks sit at the sharp end of the risk/reward spectrum. They’re often small, fast‑moving businesses with limited track records, which makes it tough to look confidently 10 years ahead.
But a few names are already reasonably established and still trade at what I’d see as ‘early‑stage’ valuations. One example is Michelmersh Brick Holdings (LSE: MBH).
So what makes it an interesting long‑term candidate?
A good old solid bricky
Michelmersh manufactures clay bricks and prefabricated components for construction, selling under brands such as Blockleys and Freshfield Lane.
In its 2025 results, revenue came in at £68.9m, down slightly from £70.1m, while statutory profit before tax fell to £4.3m and basic earnings per share to 4.02p.
Despite the profit squeeze, the dividend was held at 4.6p per share and operating cash flow rose to £10.9m. That’s rare for a penny stock.
The share price has struggled to recover since the 2008 financial crisis but now could be its time to shine.
The housing push
With Labour targeting 1.5m new homes, housing policy has moved centre stage again. The manifesto talks about mandatory housing targets and the “biggest increase in social and affordable housebuilding in a generation”. That should support demand for materials if those ambitions translate into actual projects.
Using a discounted cash flow (DCF) model, analysts estimate the stock is trading at 39.3% below fair value. Even one of the lowest 12-month targets I found (88p) is still 11.4% higher than today’s price.
The stock’s 2021 high is double today’s price. If it regains that level and continues for another five years, it could realistically triple today’s price.
But construction activity remains weak and Michelmersh’s margins are already under pressure. Net cash has swung to net debt, and management has flagged uncertainty around the timing of customer orders. If Labour’s housing plans don’t materialise, returns could lag expectations and stall the company’s recovery.
Another strong option?
Brave Bison Group (LSE: BBSN) isn’t technically a penny stock any more, as its market cap now sits a little above £100m. Even so, I see it as a small‑cap play with long-term potential.
The company is a “next‑generation marketing and technology partner”, running social‑media campaigns, influencer marketing, e‑commerce services, and its own media network across platforms like YouTube and TikTok.
For 2025, Brave Bison guided net revenue of at least £33.5m, up 57% from £21.3m in 2024, with adjusted EBITDA of at least £6.5m and adjusted profit before tax of at least £5.5m.
That growth is being driven by acquisitions and new client wins, including major names such as Primark and Royal Mail.
But with lots of recent acquisitions, execution mis‑steps or a downturn in digital ad spend could easily hit margins.
Final thoughts
For me, penny‑style stocks are classic high‑risk/high‑reward tools in a diversified portfolio. Many of today’s giants once traded for pennies, but plenty of penny names quietly disappear too.
Businesses like Michelmersh Brick and Brave Bison offer real‑world demand drivers with credible growth plans. Still, the extra uncertainty means they should only be considered as small positions alongside more defensive core holdings.
The real question is whether that mix of risk and potential suits your own long‑term plan. Investing is all about each individual’s unique goals, timeline, and risk tolerance.
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Mark Hartley does not hold any positions in the companies mentioned.
