One penny stock that has caught my eye is Pebble Group (LSE:PEBB). Or more accurately, the 95p price target given by analysts at Liberum Capital earlier this month did, because it’s 90% above the current share price of 50p.

Moreover, this was a reiteration from July, meaning the analysts continue to be bullish on this stock.

What it does

The Pebble share price has fallen around 50% in five years, giving the firm a £74m market cap. So we’re looking at a small company here. It listed in late 2019 and is down roughly 60% since then.

The company operates two businesses. Facilisgroup is a digital platform that provides business solutions for SME promotional product distributors in the US and Canada. Meanwhile, Brand Addition sells and distributes promotional products and branded merchandise to large, global companies.

Sound fundamentals

I see a number of things to like here. For starters, this is a very large niche market. According to the Advertising Specialty Institute (ASI), the US promotional products industry reached a record $26.6bn in sales last year, despite a tough economic backdrop.

Also, unlike many penny stocks, Pebble is regularly profitable. In 2024, it recorded an operating profit of £6.2m, up from £4.1m in 2020. Next year, the company’s earnings per share (EPS) are expected to grow 16%.

Based on this forecast, the stock’s forward price-to-earnings (P/E) ratio is 11.3. That’s not a particular high multiple, especially when we consider that Pebble had a net cash position of £6m in June.

The stock also pays a dividend. Currently, the forecast yield is 3.5%, and this prospective payout is easily covered by expected earnings.

Finally, the company recently confirmed that full-year results are expected to be in line with market expectations (around £128m in revenue and a net profit of £6.3m).

CEO Chris Lee said this outlook was supported by new contract wins at Brand Addition and 18 new Partner wins at Facilisgroup. And this was “despite a challenging economic backdrop in which marketing budgets are being tightly held“.

Recession risks

This last comment about a challenging market is a worry for me. Tariff uncertainty is fuelling fears of a recession, which isn’t ideal for the promotional products market.

Barclays puts the chance of a US recession at 50/50.

In H1, Pebble’s revenue dipped 4% to £58.6m, while pre-tax profit fell 10% to £2.6m. Looking ahead to next year, revenue is forecast to come in at about £133m. That’s basically the same as 2022, indicating that there’s not much top-line growth here.

My move

I think there’s a lot to like about Pebble. It has regular profits, balance sheet strength, and a well-covered dividend. It’s much higher quality than most other penny stocks, and I think it could do well from 50p, especially if economic uncertainty clears.

However, I find the current rate of growth underwhelming. Weighing things up, I think there are better small-cap shares out there today for my own portfolio. 

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Rolling higher

At 60p per share, the Pebble Group (LSE:PEBB) has risen 31.9% in value so far in 2025. It’s gained interest with UK share investors thanks to reassuringly robust trading numbers in tough conditions.

Pebble owns two very different subsidiaries: Facilisgroup, whose software supports North American promotional product distributors with end-to-end business management tools; and Brand Addition, which designs, sources, and delivers promotional merchandise for global brands.

As you might guess, its operations are highly cyclical. And this has created unwanted turbulence as trade tariffs have hit global growth — at Brand Addition, sales dropped around 4% in the first half.

Pebble’s balance sheet also remains rock solid (no pun intended), with net cash at £6m as of June. Analysts are expecting it to continue strengthening, too, with net cash of £13.1m tipped for 2025, and £15.8m and £16.7m for 2026 and 2027, respectively. This gives the company a buffer against market difficulties and enables ongoing investment for growth.

City brokers expect the penny share’s earnings to drop 25% year on year in 2025. But the small cap is tipped to get moving in the right direction again from next year — rises of 16% and 15% are forecast for 2026 and 2027.

Risks remain given the challenging economic landscape. And following recent price gains, Pebble shares now trade on a hefty forward price-to-earnings (P/E) ratio of 20.2 times. A valuation like this leaves the company vulnerable to a price correction if results worsen.

But I still think it’s worth a close look from investors. I believe it’s well placed to capitalise on strong long-term growth in the promotional products market.

Doubled in value

Agronomics‘ (LSE:ANIC) share price rise in 2025 is even more impressive. At 8.2p per share, the company’s share price has rocketed 112.5% in value since 1 January.

This penny stock invests in early-stage companies that create products from plant and animal cells. These include cultivated chicken and seafood manufacturers SuperMeat and BlueNalu, and cultivated cotton producer Galy.

Its focus on cellular agriculture gives Agronomics significant long-term potential. The world’s population is rapidly growing, and challenges like climate change will make it increasingly difficult to produce enough food. This is where innovative scientific solutions to revolutionise food supply comes in.

Investing in young businesses like this is high risk. But Agronomics’ portfolio spans 20 different companies and multiple product categories, thus lessening the risk.

Despite this year’s price rise, at just over 8p, Agronomics shares still likely trades at a large discount to its net asset value (NAV) per share. This was 14.81p as of March, according to latest financials. I think this exceptional value warrants a close look from UK small-cap investors.

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However, beneath the surface, the company’s valuation metrics have become increasingly attractive, raising the question: could Pebble be a cheap stock that investors have simply missed?

Strong valuation metrics

Pebble’s forward valuation stands out in the small-cap universe. After a period of decline, the stock now trades on a forward price-to-earnings (P/E) ratio of just 11.5 for 2025, falling to 10 in 2026 and 8.8 in 2027. These are based on analysts’ forecasts. This is a substantial discount to both its historical averages and the wider market.

Meanwhile, Pebble’s rewarding shareholders with growing dividends. The forecast dividend yield is set to rise from 5% in 2025 to 5.4% in 2026 and 5.5% in 2027. Importantly, these dividends are well covered by earnings, with the payout ratio expected to remain below 60% throughout the forecast period. This coverage gives management flexibility to maintain or even increase dividends, even if profits fluctuate.

Net cash and adjusted valuation

One of Pebble’s most attractive features is its net cash position. The company has consistently reported net cash with £16m in 2024 rising to £18.3m by 2027, according to forecasts. This strong balance sheet reduces financial risk and enhances the company’s ability to invest or return capital to shareholders.

Adjusting for net cash, Pebble’s forward P/E ratio becomes even more attractive. Subtracting net cash from the market cap, the net cash adjusted P/E is around eight times.

Risks

No investment is without risks. Pebble operates in the promotional products sector, which can be cyclical and sensitive to changes in corporate marketing budgets. A slowdown in client spending could impact revenues and margins. While the company is investing in digital platforms, the sector’s competitive, and there’s no guarantee Pebble will maintain its edge.

On that front, I’d also highlight that expected earnings for 2024 are 25% lower than in 2024. This has been more than accounted for with the falling share price, but it highlights the company’s vulnerability to changing environments. Trump’s tariffs may also be factored into these assumptions. North America makes up around half of the global promotional products market. Uncertainty could impact US and global sales.

Investors should also consider liquidity risks, as AIM-listed shares can be more volatile and less liquid than main market peers.

One to consider?

The Pebble Group offers a rare combination of a low valuation, strong balance sheet, and growing dividends. While sector and market risks remain, the company’s forward P/E, net cash position, and dividend coverage make it an interesting option for value-focused investors willing to take a long-term view to consider.

As always, careful due diligence is essential, but Pebble’s metrics suggest it could be a hidden gem on AIM. The average share price target suggests the stock could be undervalued by 179%. It’s one I’m going to keep a close eye on.

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As such, I can find ideas that can generate me good profits if I choose the right ones. Here are a couple I have on my radar now.

It’s never just a game

Frontier Developments (LSE:FDEV) is a PC and console game developer. Popular games by Frontier include F1 Manager and Jurassic Park Evolution. The share price has dropped by 65% in the past year, with the bulk of that coming in the past few months.

The main reason for the drop was due to a trading update in January where the business announced it would miss revenue and operating profit targets for 2023, due to lower game sales than expected.

However, the half-year results (released just a few days later in January) actually were very positive. Revenue grew by 16% versus H1 2022, with the business also swinging from an operating loss of £1.3m to a profit of £6.9m.

Further, the business has a generous gross profit margin of 63%. This means Frontier is very efficient at controlling the cost of goods sold. In turn, this can help to filter down to a larger net profit.

Even though the expected miss on numbers this year is a risk, I don’t see it as a long-term problem. The business is still growing year-on-year. I feel over the course of this year it can recover the recent drop, providing me with a generous profit.

A growing global business

The second stock is The Pebble Group (LSE:PEBB). With a market-cap of £175m, it sits as a small-cap share. Over the past year, the share price is down 9%.

The company focuses on providing promotional products and services to other brands. This can range from the creative side to more on the delivery. It has offices all around the world, from China to Canada.

I like the business because of the global reach. Even though the company is still relatively small, it has a great foundation to expand due to the offices around the globe. Indeed, it’s already growing, with H1 2022 revenue up 29% on the same period the year before.

If it can continue this strategy, I feel the share price could start to take off later this year as it gets more media and investor attention.

One concern I do have is that the business might struggle to tap into big businesses, as some won’t outsource this area of marketing. It’ll be all cared for in-house, which could hinder growth further down the line.

On balance, I think both ideas could make me money this year, so am looking to buy now.

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Red metal mammoth

I think Taseko Mines (LSE: TKO) could prove to be a great stock for me to buy as electric vehicle sales explode.

According to the Copper Development Association, a vehicle running on an internal combustion engine tends to contain 23kg of copper. That compares with the 40kg that’s loaded into the average hybrid electric vehicle. Or the 83kg that sits inside a battery-powered car.

The copper Taseko hauls from Canada’s colossal Gibraltar mine will be needed in huge quantities to make these vehicles. That’s without considering the large amounts of the highly-conductive metal that’ll be needed to create a charging infrastructure for these vehicles.

Gibraltar is the fourth-biggest copper mine in North America and is expected to continue operating until 2038. Taseko also owns the low-carbon Florence Copper project in Arizona. This is on track to produce its maiden output in 2023. And it is looking to begin construction on the gigantic Yellowhead mine in British Colombia towards the middle of the decade. This Canadian asset’s proven and probable red metal reserves sit at an eye-popping 820m tonnes.

It’s all well and good sitting on blockbuster mining projects. But bringing their riches to the surface can be extremely problematic. Any development, construction and production issues could bring Taseko’s profits expectations crashing down. And with it the share price. Still, on balance, I think this UK mining share has plenty going for it.

Another dirt-cheap UK share I like

Companies are spending massive sums on marketing and advertising to recover the revenues lost during the global pandemic. Analysts are expecting such expenditure to keep rising in 2022 too, which bodes well for The Pebble Group (LSE: PEBB).

Through its Brand Addition and Facilisgroup divisions it sells a vast range of promotional goods to big corporations and allows SME promotional product distributors to peddle their wares.

Revenues at The Pebble Group rocketed 39.3% year-on-year in the first half of 2021, to £46.8m, as businesses turbocharged marketing spend. But this UK share is more than just a flash in the pan. It has built long-term relationships with global blue-chip companies. This means more than 90% of revenues are recurring, providing the company with excellent profits stability.

The promotional products market is growing rapidly as they enable firms to raise brand awareness at relatively low cost. The Pebble Group estimates that around 10% of total marketing spend is dedicated to producing logo-stamped T-shirts, mouse mats and the like.

I am aware that earnings at companies like this are highly sensitive to broader economic conditions. I’d therefore expect the recent recovery at The Pebble Group to suffer should the pandemic continue to worsen. Still, from a long-term perspective, I reckon The Pebble Group provides plenty of opportunity for lovers of cheap UK shares like me.

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