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Boohoo (LSE: BOO) is one of those ‘growth stocks’ that unfortunately hasn’t done much growing lately. Quite the contrary. In a spectacular reversal of fortunes, the Boohoo share price has plummeted from near all-time highs between February and April 2021 when it regularly traded at over 340p per share, to trading at 87p yesterday. That is a  70% decline in a year. Naturally, investors have been wondering what happened. Perhaps more importantly, will the Boohoo share price rebound?

Scandalous fashion

ESG is a buzzword in commercial circles right now. The term is an acronym for environmental, social and governance. Investors have increasingly been considering these non-financial factors in their investment decision-making. It therefore comes as no surprise that when allegations that Boohoo tolerated serious failings regarding worker treatment at one of its Leicester suppliers, this was cause for alarm. It turns out being implicated in worker exploitation is not a good look.

While this revelation by several media outlets did not immediately cause the Boohoo share price to plummet, investors have slowly moved away as more and more news came out on the issue. To its credit, Boohoo has cut ties with some suppliers but it seems like the reputational damage has been done.

Not dressed to impress

Labour practices aside, the Boohoo share price could have even rougher days ahead. At the half-year mark in August, last year Boohoo reported sales of £976m. That is 20% higher than the same period for 2020/21. This was great but didn’t translate to any growth in actual pre-tax profits, which sat at just £24.6m. This indicates that after the taxman is done, the net margins on this business will be no more than 3%.

This assumption is bolstered by the fact that Boohoo has downgraded its full-year outlook. Initially, sales were expected to grow 20%-25%. That has now been revised downward to 12%-14%, around half of earlier expectations. As if that was not enough, inflationary pressures threaten to make that bottom line even thinner. Rising inflation means rising shipping, wages and marketing costs. These costs cannot simply be passed onto consumers when higher interest rates may mean less spending anyway. 

Cheap fashion, cheap share price 

So there are real issues here, but is the Boohoo share price simply too cheap to ignore? Some of my colleagues at The Motley Fool seem to think so. They point to the factors such as how revenues have increased almost six times in the past five years, the fact that Boohoo is investing heavily in new premises and that the supply chain issues that have affected the company should fade as the world exits the pandemic. These are fair points.

The current price-to-earnings ratio of 9.96 is low enough to indicate that there is value here. The stock could be picked up right now on the cheap and may show some positive growth. Nobody knows when this will be though. But I am of the opinion that come earnings day in April of this year, the market may have more cause for pessimism and that’s why I am not betting on a major rebound any time soon and not buying the shares.

Stephen Bhasera has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The pullback in growth stocks has continued in recent weeks as inflationary pressures refuse to ease. This is adding to fears that interest rates will have to rise significantly, a factor that will increase borrowing costs. Nonetheless, while growth stocks are struggling in the short term, I remain confident in many of their long-term futures. This means that, as a part of a balanced portfolio, I’m continuing to buy them. Here are two I’m particularly keen on.

Latin American e-commerce giant

MercadoLibre (NASDAQ: MELI) released its Q4 results on Tuesday evening, and it offered further evidence of its incredible growth prospects. For example, the company reported net revenues of $2.1bn in the quarter, which was up 73.9% on a currency-neutral basis, and 60.5% in US dollars. This meant that full-year revenues grew to $7bn, over a 75% increase from last year. The company also has a diversified source of revenues, due to both e-commerce and the fintech segment. Fintech performed especially well in the fourth quarter, with revenues rising to $773m, a 70% increase from last year. As banking penetration in Latin America is still quite low, there is certainly room for more growth. These are all very positive signs in growth stocks.

Despite this, I was slightly disappointed to see a net loss of $46.1m, after being profitable over the past few quarters. This loss was mainly attributable to foreign currency losses — a downside of operating in international markets — and major interest expenses due to the company’s large debt pile. But I’m not overly worried as these seem like short-term problems.

As such, I’ll continue to add MercadoLibre shares to my portfolio, especially as the stock remains below $1,000. This means that it currently trades at a price-to-sales ratio of 7, which is historically low for MercadoLibre and below other growth stocks. For a company with such incredible growth, this seems like a bargain.

Another beaten-down growth stock

SoFi Technologies (NASDAQ: SOFI) is another growth stock that piques my interest. In fact, after reaching highs of around $24 last November, it has since fallen back to just $10. This sell-off now seems overdone for these reasons.

Firstly, the fintech has recently acquired a bank charter, meaning that it will be able to directly lend to customers. This should be a major boost for profitability. Secondly, the bank is growing at incredible rates. Indeed, in the Q3 trading update, it announced that it had 3m members, which was a 96% year-on-year rise.

There are certainly risks with the company, however. For example, despite seeing slower revenue growth than MercadoLibre, it trades at a P/S ratio of 8. This may signal that there is further to fall. Further, I was slightly concerned at its recent acquisition of Technisys in an all-share deal worth $1.1bn. Although it is expected that this will create around $80m in cost savings between 2023 and 2025, I was disappointed to see the share dilution and would have preferred the company to use some debt in the deal. I also feel that the deal may have been slightly expensive.

Even so, I have faith in CEO Anthony Noto and think that SoFi can be a real competitor in the fintech space. Therefore, I may add more SoFi shares to my portfolio at its current price.

Stuart Blair owns shares in MercadoLibre and SoFi Technologies. The Motley Fool UK has recommended MercadoLibre. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The Cineworld Group (LSE: CINE) share price is slumping once again. The penny stock’s down 6% during the past week alone, taking losses over a 12-month period to 60%.

In a recent chilling note analysts at Hargreaves Lansdown said that “the horror story continues for Cineworld with little sign that there will be a rapid recovery in its fortunes, and so its share price is bumping along in the cheap seats.” Susannah Streeter noted that blockbuster releases like James Bond outing No Time to Die and SpiderMan: No Way Home have helped bookings at the business of late. But she added that “spies and superheroes alone won’t be the secret weapon back to health.”

Why Cineworld’s share price could keep sinking

I won’t buy Cineworld because of the huge amount of debt has hanging around its neck. It’s a problem that’s set to grow by another several hundred million dollars too following a court ruling concerning its failed acquisition of Canada’s Cineplex. I also worry about how changes to the way movies are released in favour of streaming services like Netflix will damage box office sales.

It isn’t out of the question that cinema ticket sales will continue their recent rapid ascent. But all things considered I think Cineworld still presents too much risk to me as a share investor. I think the share price could continue to slide.

2 better penny stocks to buy

This isn’t something that keeps me up at night, though. There are, after all, plenty of other low-cost UK shares available for me to buy today. Here are just two penny stocks I think are great buys for me following recent price weakness.

SIG

Building materials supplier SIG just fell to its cheapest for almost a year as investors fretted over its operations in Eastern Europe. Its share price is now just 7% higher than it was 12 months ago. I’d use this as an opportunity to buy the company’s shares (it now trades on a rock-bottom forward price-to-earnings growth — or PEG — ratio of 0.2).

I expect demand for SIG’s products to rise steadily as construction activity in Europe heats up. I also reckon sales of the penny stock’s insulation materials could soar as the drive to save energy picks up. I’d buy it even though sales in Poland could suffer as a result of the ongoing Ukraine crisis.

The Works

Retailer The Works has slipped more than 7% in value in just a week as concerns over crushed consumer spending power have risen. Inflationary pressure has the potential to push costs up at the business too. But I think the benefits of owning The Works could outweigh the risks. I think demand for its cheaper games, craft items, books and toys could rise as shoppers try to stretch their shopping budgets as far as they can.

I also think the steps The Works is taking to boost its online operation could pay off handsomely as e-commerce grows. Sales via the value retailer’s website leapt 72% in the 11 weeks to 16 January, latest financials showed. Today this penny stock trades on a forward price-to-earnings (P/E) ratio of just 7 times.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I’m searching for the best penny stocks to help turbocharge my wealth over the next few years. I think these low-cost UK shares could be just what I’ve been looking for.

Freight hero

I’d buy Xpediator (LSE: XPD) shares as Europe steadily recovers from the nightmare of Covid-19. It’s a penny stock that offers freight services by air, across land or by sea. It’s therefore well placed to benefit from lockdowns ending and trade flows picking up as economic conditions improve. I’m also a big fan of Xpediator because its warehouse, logistics and e-commerce fulfilment operations leave it well placed to exploit the internet shopping boom.

Trading at the firm is already at the stage of bouncing back strongly. Trading across all three of its divisions had continued strongly in 2021, it announced last month, with revenues at the company’s core Freight Forwarding unit experiencing “strong increases”. As a consequence, Xpediator said it expected full-year turnover to leap by at least 42% from 2020 levels.

I like its exposure to fast-growing economies in Eastern Europe. This helped Freight Forwarding sales to jump so robustly last year. But a word of warning: it’s worth remembering that growing political turbulence in this part of the world could pose a threat to shareholders.

Another penny stock for the e-commerce revolution

Like Xpediator, I think DX Group’s (LSE: DX) a great way for me to make money from online shopping. It’s a courier with operations in the UK and Ireland, giving it access to what is by far Europe’s biggest e-commerce market. Pleasingly DX Group is expanding rapidly to make the most of this opportunity. It’s opened six new depots and expanded another since last summer. And it plans to open another 12 in the next two years.

Technological progression, combined with the huge investment retailers and manufacturers are making in e-commerce, means that the quantity of parcels that DX Group shifts should continue rising. My main concern with buying this penny stock is that fuel prices are rising to fresh highs week after week. The increasing cost of fuelling its vehicles is a big danger to future profits growth.

Why I’d buy despite recent suspension

I can’t talk about DX Group without discussing a particular elephant in the room. In January the company’s shares were suspended from trading due to its ongoing failure to release full-year financials. This is related to a corporate governance inquiry, the company has previously said, and a failure to get those numbers out (for the 12 months to June 2021) has led to the resignation of auditor Grant Thornton.

It’s not a good look, clearly. But I’m encouraged by DX Group’s statement that the enquiry is “connected to a disciplinary matter” rather than the company’s trading performance or financial position. This is a stock I’d still strongly consider buying when the trading suspension eventually lifts.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Recent stock market falls are understandably worrying for many investors. But I reckon it’s a mistake to focus too much on the short term. The former penny stock I’m looking at today has risen by more than 1,000% over the last five years. The recent market wobble hasn’t made much difference to that gain.

Since February 2017, this investment has turned £1,000 into more than £11,000, including dividends. That’s a potentially life-changing profit. Some investors think this share still looks cheap. I’ve owned this stock before but sold my shares too soon. Should I buy back in today?

Winning with oil and gas

The company in question is North Sea oil and gas producer Serica Energy (LSE: SQZ). Chief executive Mitch Flegg oversaw a transformational deal with BP in 2018, when the company bought the Bruce, Keith and Rhum (BKR) fields in the North Sea.

This acquisition made Serica a substantial North Sea producer. Over the last year, the group has been perfectly positioned to benefit from surging oil and gas prices. More than 85% of Serica’s production is gas, and the company supplies around 5% of total UK gas production.

Broker forecasts suggest that Serica will report a profit of around £200m for 2021, compared to £64m in 2019 and just £8m in 2020.

I’ve been a fan of Serica for a while. In my view, this is a well-run business with strong finances. I certainly regret selling my shares in October last year — the stock has risen by another 20% since then.

Is this former penny stock still cheap?

I think Serica shares could still be cheap. But there are a couple of things about the company’s valuation that make me cautious.

First of all, the shares are currently trading on a price/earnings (P/E) ratio of just three times 2022 forecast earnings. That’s unusually low, even for a fossil fuel stock. BP, for example, has a forecast P/E of seven.

My second concern is that Serica’s dividend is unusually mean. The group’s net cash balance was £218m at the end of 2021. Earnings of 82p per share are expected for the year — a record high. Despite this, broker forecasts suggest the 2021 dividend will be just 3.5p per share, giving a measly 1.6% dividend yield.

These numbers suggest to me that the market doesn’t believe Serica’s profits are sustainable. I share this view. At some point, I think that lower oil and gas prices plus rising decommissioning costs will cause Serica’s profits to plummet.

I also get the feeling that Mr Flegg is holding on to the company’s cash because he expects to need it in the future. My guess is that Serica’s big cash pile is being earmarked for decommissioning costs and — perhaps — for acquisitions to replace the BKR fields, when they start to decline.

Serica share price: my decision

I think Serica is a good business and I admire what chairman Tony Craven-Walker and CEO Mitch Flegg have achieved. It’s possible that the two men will continue to expand this business, rewarding shareholders.

However, I just don’t think the shares are as cheap as they might seem.

In my experience, buying commodity producers when commodity prices are high is often a bad idea. Although I think Serica’s profits may rise this year, I suspect they will fall from 2023 onwards. On balance, I think it’s probably too late for me to buy.

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Recent market volatility means a lot of top stocks are trading at dirt-cheap prices. There are plenty of penny stocks in particular which appear to have been oversold in recent days and weeks. Small-cap shares like these are often among the first to be sold when market confidence buckles.

I don’t plan to run for cover however. In fact I plan to follow the example of billionaire investor Warren Buffett and go hunting for bargains to buy.

Here are a couple of penny stocks that have caught my attention at current prices. Each has the potential to supercharge my returns in the coming years.

A top retail share

Many UK retail shares have sunk as investors have considered the impact of soaring inflation on their profits. Card Factory (LSE: CARD), for instance, has fallen 12% so far in 2022 in value as concerns of rising costs and falling consumer spending power have grown.

Okay, Card Factory still remains around a fifth more expensive than it was this time last year. But following that recent share price weakness I think it could be considered too cheap for me to miss. At 52.6p per share, the retailer trades on a rock-bottom forward price-to-earnings (P/E) ratio of 8 times.

I think investors may be making a mistake by heavily selling Card Factory shares. People don’t stop sending cards and celebrating with balloons, poppers and similar party paraphernalia when times get tough. What they do however, is try to buy these items for the cheapest price possible.

In my opinion this means shoppers might shun the likes of more expensive retailers like Clinton Cards and march through value operator Card Factory’s door instead.

I do worry about how Card Factory could fare against the trendier offerings of online-only operators like Moonpig and Thortful. But I believe this threat is more than reflected in this penny stock’s rock-bottom earnings multiple.

Falling into penny stock territory

UK shares with interests in Russia and Eastern Europe have suffered particularly badly in recent days. Take Tritax Eurobox (LSE: EBOX) as an example.

This property stock — which lets out properties in European countries, including Poland — has seen its share price slump to 14-month lows this week. It now sits inside penny stock territory around 99.2p having fallen 16% over the past 12 months.

The situation in the region is truly dreadful, and we all hope it can be resolved soon. But I like Tritax Eurobox’s long-term prospects and think a fall in its share price is worth looking at. I know the current situation could cause demand for big-box property assets to fall in its Central and Eastern Europe territories. But as a long-term investor, I see the advantage of owning Tritax Eurobox shares. I think profits could soar as e-commerce turbocharges the need for warehouse and logistics spaces.

I like the company’s ongoing expansion in fast-growing markets (this week it paid €144.3m to acquire a property in the Netherlands). I think this UK share is particularly good to help me boost my passive income; its forward dividend yield sits at 4.5%.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The FTSE 100 index is one of the best performing stock indexes in the world so far this year. Some technology-heavy indexes like the Nasdaq 100 have seen declines of 14% year-to-date. Meanwhile, the FTSE 100 is up by around 2%. It’s not a phenomenal return by any means. But it shows to me that the leading UK shares are in demand among global investors right now.

I’d say it’s partly due to the types of shares in the Footsie. It’s comprised of relatively few technology companies. It is, however, filled with many banks, miners, and utilities. I reckon all three sectors could continue to perform well and it’s also where I’d find shares that I’d consider buying right now.

A FTSE 100 giant

First, there’s mining giant Rio Tinto (LSE:RIO). This is a solid buy-and-hold stock for me. As the second-largest metals and mining company in the world, founded 149 years ago, Rio has a long track record. Iron ore accounts for 66% of its sales. This commodity is the main raw material used to make steel, which in turn is used to build buildings, bridges, cars, and many other products around the world. Demand for infrastructure and products should grind higher over the long term. A word of warning though. A weaker property sector in China is a risk to iron ore demand and steel prices in the near term.

Top features

As a FTSE 100 investment, Rio has some remarkable attributes. For instance, it ticks a lot of boxes including profitability, cash flow, and dividend income. It boasts a return on capital of over 30% and a chunky profit margin of over 45%. These alone are signs of a quality share, but that’s not all. With a price-to-earnings ratio of just eight times, I reckon it’s pretty cheap too. But for me, the cherry on to is its 9% dividend yield. That’s among the highest in the entire FTSE 100 index.

I need to bear in mind that weaker iron ore prices in the near term could be a risk for earnings and dividends. But overall I would happily buy these shares today, and even more if the price happens to drift lower.

Electrifying stability

The utilities sector is often thought of as slow-moving and dull. And I reckon it is. But that doesn’t mean it can’t make me money. In times of crisis, often it’s the less exciting shares that provide stability. That’s why I’d consider adding SSE (LSE:SSE) to my Stocks and Shares ISA.

In contrast to a successful growth stock, SSE’s share price has remained relatively flat over many years. Yet it has still managed to provide shareholders with a 7% annual return over the past decade. The reason for that is a stable and relatively high dividend yield. Currently, SSE offers a 5% dividend yield. Note that there are FTSE 100 shares with higher dividend yields, but bigger isn’t always better here. Much greater yields may not be sustainable. That’s where SSE stands out. It has a near three-decade history of distributing dividends to shareholders.

Although its past track record doesn’t guarantee what it does in the future, it does provide me with some confidence. As one of the UK’s leading generators of renewable electricity, there should be plenty of business for years to come.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

UK dividend stocks are shares in a British company that make small payments to investors a few times a year, as a form of passive income. This investing strategy is often called dividend investing. It’s very popular because, over time, shareholders can build the size of their portfolio by re-investing their dividend payments.

On its face, £250 doesn’t seem like enough to be worth investing. How much could it be worth in the long run? Even if a company pays a dividend as high as 13%, that would only generate £32.5 by the end of the year. However, I would argue that it’s exactly with these bits of spare cash, that successful small investors build large portfolios. Right now, I see two great companies that I would buy shares with if I had a spare £250.

Tobacco products

Tobacco companies are often an excellent source of passive income because they are extremely profitable businesses and frequently pay out large dividends. Manufacturing expenses are minimal and customers are also usually very loyal to their preferred brands.

There has been a shift in recent years. Smoking is generally on the decline, resulting in decreased cigarette sales, lower revenues and profits. To combat this, British American Tobacco (LSE: BATS) has made significant investments in next-generation products. So far, this has been costly since creating new brands costs money but non-cigarette revenue is growing and increased by 42% to £2bn last year. At the same time, higher pricing has helped the firm improve cigarette revenues by 4%.

Exchange rate fluctuations can also pose a danger to revenues and earnings, especially for a worldwide corporation like BAT. Moreover, tobacco stocks are not popular with many investors for ethical reasons, which may have an impact on the share price. However, the financial performance remains remarkable for the time being. Its yearly dividend has been boosted again, and it now yields 6.3%

Financial services

This possible addition to my portfolio is one of the few companies that did not suspend dividends during the early stages of the pandemic. That’s the kind of consistency that dividend investors should crave.

Legal and General (LSE: LGEN) currently issues a dividend yield of 6.5% and has made public its intentions to increase that yield in the future. There is no guarantee that this will happen of course. No company is under an obligation to pay a dividend of any sort. But it sets a good precedent and I doubt LNG would want to let down shareholders. The UK-based financial services provider has a large customer base and some good brand recognition to back up this potential shift.

There is a potential risk that newly-introduced rules on insurance renewal pricing could affect profits in the future. But these new rules could also create greater clarity for potential customers, leading to increased sales.

Holding dividend shares

Returning to the crux of the argument, £250 may not seem like much to invest, especially in UK dividend stocks. But I believe that making any small addition to my portfolio is a better use of my money than almost anything else. Roughly £16.20 in dividends at the end of the year may not seem like much. But if I continue to add small amounts of money to this portfolio over time, that pay-out will grow exponentially. Over 30 years that £250 investment would have earned me £487. Just imagine if I did this every month or every week!

James Reynolds has no position in any of the shares mentioned. The Motley Fool UK has recommended British American Tobacco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.