Why might investors steer clear of this one? Well, interest rates are still high. And global trade friction could push inflation and keep rates up for longer. And that all puts pressure on building demand.

But against that, forecasts that put the price-to-earnings (P/E) ratio down around 10 by 2027 make it look undervalued to me. Net cash rather than net debt strengthens that feeling. And a forecast 4.4% dividend yield puts a cherry on top.

Even with the sector risk, it has to be a consideration for long-term value investors.

Investment Trust

CT UK High Income (LSE: CHI) investment trust is another favourite that’s just above the usual penny share limits. But it’s not too far out with a £119m market-cap. And a share price rise of around 35% in the past five years has pushed it to only a few pennies over a pound.

What does it have that I like? It has Shell, AstraZeneca, NatWest, Legal & General, Imperial Brands… that’s what. They’re all in its top 10 holdings, together with some other FTSE 100 dividend big-hitters.

They contribute to an expected dividend yield of 5.4%. And dividends are paid quarterly, which could make it a more attractive proposition for investors wanting steady income.

Being such a small-cap trust it must be at greater risk of investors pulling out during downturns and sending the price down. And going for something like the much bigger City of London Investment Trust might be a safer alternative. But the diversification should help offset the risk. And I do like that dividend.

Jam tomorrow

Am I pushing things a bit with a share price up around 130p? That’s where specialist medical diagnosis firm Diaceutics (LSE: DXRX) is, and its market-cap’s just about £112m. But that’s due to a 50% rise since early 2024, so it’s close to being a penny stock time-wise. And forecasts mean I really can’t ignore it.

The company’s loss-making right now after a decline following the Covid days. But forecasts suggest profit in the 2025 fiscal year, with a rise in 2026 giving a P/E of under 18.

It’s also in a niche market. And we never know when a big pharma company might muscle in on its business.

But analysts are bullish on the stock with a strong Buy consensus. And their price targets range from 180p to 225p. Even the lower end is around 35% above the current price.

It’s a tiny, high-risk, currently unprofitable, jam-tomorrow growth stock. But the jam might actually not be very far way.

The post 3 cheap near-penny stocks to consider buying right now appeared first on The Twelfth Magpie.

With that in mind, here are two low-cap stocks that I think seem to be on the right trajectory.

Targeting sustainable energy

With a £51.1m market cap and share price of 1.3p, Helium One (LSE:HE1) is very much in penny stock territory. 

As the name suggests, it’s an energy prospecting company that explores and develops sites for helium gas extraction. It currently operates three projects in Tanzania, the largest of which, Rukwa, is developed and almost ready for extraction. The company has a strong focus on sustainability and carries out environmental and social impact assessment (ESIA) studies to help it secure appropriate licensing. 

However, it’s not profitable yet and has been burning through cash quickly. Reports suggest it has around $8.7m left but fortunately, it remains debt-free for now. Over the past year, the share price fell 80% but recently things have improved, with it gaining 30% since early April. 

So are things turning around?

Analysts at Liberum think so. They believe the company is on the verge of tapping “world-class” concentrations of helium at its Itumbula site in Rukwa. The London-based investment bank calculates the shares could be worth as much as 5.3p based on the commercial value of the untapped gas.

Naturally, investing in mining can be risky, particularly when the resource has only been discovered and extraction is yet to begin. Should Helium One succeed, it could spell huge profits for the company. But if its cash runs out before it becomes profitable it could spell disaster.

A niche medical company

With the share price now up to 103p, Diaceutics (LSE:DXRX) is technically a penny stock no more. But with a market value of only £87m, it’s still a very small-cap company. 

It appears to have a good business model of providing sought-after diagnostic testing for the precision medicine industry. Despite its small size, it reportedly works with 21 of the top 30 pharmaceutical companies in the world. As evident on the chart below, it was in high demand during the pandemic but has since struggled to enjoy the same success.

That’s notably the key risk the company faces. It’s in a very niche sector, reliant on sustained demand for specialist medical diagnosis. While it doesn’t appear to have any direct competitors currently, it could be priced out of the market by a leading pharma company. Profit margins are down to 0.03% from 0.8% last year and earnings growth lags behind share price growth –- suggesting lots of speculative buying. 

But despite limited growth in the past five years. the share price has done well recently, up 22% in six months. The company seems to be on the right track. Using a discounted cash flow model, analysts estimate the stock to be 78% undervalued. They’re also very bullish on it too, with the average 12-month price target at £1.67. That’s a 60% increase!

The post 2 penny stocks this Fool thinks could deliver phenomenal returns! appeared first on The Twelfth Magpie.

I plan on buying shares in these three companies before their prices take off.

A fledgling pharma firm on the rise

Belfast-based diagnostics and testing company Diaceutics (LSE:DXRX) serves 20 of the 30 largest pharmaceutical companies worldwide. Its products help streamline the development and launch of specialised medicines.

Despite many high-profile clients, it’s essentially a penny stock with an £88m market cap and 104p share price. Besides a brief surge in 2020, the share price has traded around 100p for the past five years.

Earnings have been declining at an average annual rate of 17.7% and profit margins are down to 0.03% from 0.8% last year. With a price-to-sales (P/S) ratio of 4, it’s on par with the industry average.

So why do I think it’s got potential?

For one, a significant number of insiders recently started buying the shares. This is usually a good indicator that the company is expected to profit soon. Approximately 33,564 shares were bought by insiders recently, while it’s been over nine months since any were sold.

And it hasn’t gone unnoticed. Consensus from several analysts forecast a price rise of 60% on average over the next 12 months. Using a discounted cash flow model, analysts estimate the shares to be undervalued by 78%.

The booming mid-cap pharma stock

Spire Healthcare Group (LSE:SPI) is the second-largest provider of private healthcare in the UK. The FTSE 250 stock shot up after Covid and has been doing well since. It gained 10% this past year and is up 75% in the past five years. 

Despite the growth, future cash flows estimate the share price to be 65.8% below fair value. Checking analyst’s forecasts, there’s a good consensus that the price could rise 26% in the next 12 months.

So what’s the catch?

Spire has a fair amount of debt and limited operating income to cover the interest payments. Its interest coverage ratio is only 1.4, so even a small decline in income could reduce its ability to service debt. Although it’s doing well, the private healthcare market is highly competitive so it must stay ahead of the curve to avoid defaulting on debt.

The FTSE 100 pharma giant with promise

Hikma Pharmaceuticals (LSE:HIK) has had lacklustre performance over the past five years, up only 1.6%. Now at £17.88, the share price crashed hard in 2022 and has struggled to break back above £20 since. 

What’s more, some of its biggest-selling generic drugs are coming off patent soon, so it’s at risk of losing that market share to competitors.

So why do I think it’s got potential?

The firm has been expanding rapidly, acquiring new business and building new facilities. Its injectable and generic drug businesses are in high demand and it has the resources to meet this need. Future cash flow estimates indicate the share price could be trading at almost 30% below fair value. Based on consensus from several analysts, the price rise is expected to grow 28% in the next 12 months.

The post I’m considering these 3 undervalued pharma stocks to buy for my portfolio in April appeared first on The Twelfth Magpie.