I’ve been scouring the London Stock Exchange for the best penny stocks to consider buying. Here are two that I think are worth a closer look right now.
Both are tipped to deliver spectacular earnings growth, as well as provide solid dividend income, in the next two to three years. And they appear to be dirt cheap at current prices.
Trifast
Trifast (LSE:TRI) manufactures industrial fastenings. And its share price collapsed at the start of the year. It fell as weakness across multiple end markets and geographies hammered sales of its products.
Touch conditions might prevail as Chinese economy splutters. But analysts expect sales to accelerate sharply as falling global interest rates boost demand in the key automotive, electronics, and smart infrastructure markets.
Encouragingly these sectors look poised for solid growth over the long term too. This could help its share price balloon from current levels.
Trifast is tipped to increase earnings by a spectacular 277% this financial year (to March 2025). Healthy growth of 40% and 21% is tipped for fiscal 2026 and 2027, respectively, as well.
As a consequence, Trifast’s price-to-earnings (P/E) ratio topples over the period, from 13.6 times this year to 9.7 times the year after, and 8 times the year after. This is based on its current share price of 82p.
On top of this, the manufacturer’s price-to-earnings growth (PEG) multiple remains below 1 throughout the period. Any reading under this threshold indicates that a share is undervalued.
Penny stocks aren’t famed for offering decent dividends. This is because small-cap shares typically invest any spare cash they have for growth rather than distributing it to shareholders.
However, a strong balance sheet means Trifast is tipped to offer decent dividends and growing through the next three years too. The dividend yield is 2.7% for this year, and rises to 3% and 3.3% for financial 2026 and 2027.
Facilities by ADF
Facilities by ADF (LSE:ADF) is another rare penny stock that offers investors a strong and growing dividend.
The annual reward is expected to rise by almost three-quarters next year. And so a 2.8% dividend yield for this year leaps to a market-beating 4.9% for 2025.
This prediction reflects City estimates that earnings will rise 264% and 90% in 2024 and 2025 respectively.
The company provides mobile production facilities to Britain’s creative industries. We’re talking about production offices, make-up vans, and so on. It has significant growth potential as global studios increase investment in Britain’s film and TV industries.
Facilities… is spending on acquisitions to exploit this opportunity too. Be aware, however, that M&A-based growth strategies come with execution risk. And its purchase of Autotrak in August is especially bold — a price of up to £21.3m is huge given the company’s market cap is just over £57m.
At 53p per share, Facilities… trades on a P/E ratio of 10.5 times for 2024. And this topples to just 5.5 times for next year.
With its PEG ratio also falling below 1 for these years, I think it’s a top small cap for value seekers to consider.
This post was originally published on Motley Fool
