1 penny stock I’m considering for my Stocks and Shares ISA

Picked well, penny stocks have the potential to dramatically improve my wealth in a short period of time. This is especially true if I hold them in a Stocks and Shares ISA. Doing so means I won’t need to pay tax on any profits I make. 

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Today, I’m returning to look at a company that’s been on my watchlist ever since it was listed in June 2021. Should I finally dip my toe in the water?

Penny stock disaster

Based on recent performance, it’s just as well I’ve held back from pulling the trigger on bathroom specialist Victorian Plumbing (LSE: VIC). From jumping to a 52-week high of almost 342p early on, the share price has since collapsed 75% to 85p. What on earth’s happened here?

I don’t think there’s one single factor to blame. As I remarked at the time, it’s clear that Victorian Plumbing’s IPO was opportunistic and designed to coincide with the boom in DIY seen since the beginning of the pandemic. This allowed original investors to make an absolute killing. And I can’t really blame them for wanting to achieve the best price possible for their stakes. 

The issue with being the largest IPO ever on the junior AIM market is that new investor expectations jumped ahead of reality. Since those heady days, Victorian Plumbing has experienced issues with its supply chain (like many other businesses). Revenue growth has also slowed as the rush to buy new bathroom suites replaced with spending on other things.

Buy the (big) dip?

On the one hand, I’m now able to buy stock in a cash-generative company for 17 times earnings, based on analyst forecasts. That’s not screamingly cheap but nor is it is eye-poppingly expensive. Interestingly, VIC also has a PEG (price/earnings-to-growth) ratio of just 0.5. Anything less than one suggests new buyers are getting a lot of bang for their bucks. 

I’m also attracted to Victorian’s online-only/capital-light business model. It’s already profitable (in contrast to a lot of highly-valued fluff out there) and there’s a decent amount of cash on the books.

Furthermore, the company has a sizeable share of the market and customer reviews are generally very positive. To round things off, CEO/founder Mark Radcliffe retains a huge 47% stake. If anyone wants the company to bounce back, it’s him. 

But let not get ahead of ourselves. An obvious risk with this penny stock is that things could get worse before they get better. A military conflict in Eastern Europe has the potential to hit growth stocks like this, even if it’s irrelevant to selling bathrooms. Margins look like being squeezed for the foreseeable future too.

Victorian Plumbing also has a small free float. Just 35% of the company’s stock is available to trade in the market. That could exacerbate an already bad situation. It only takes a small amount of selling to really move the needle. On a more optimistic note, the reverse is also true. 

My verdict

I do feel like the (prolonged) sell-off of this penny stock has been overdone. Nevertheless, I’m inclined to wait until after this month’s AGM (and a potential update on trading) before deciding whether now is the time to strike.

For now, this penny stock stays on my ISA watchlist.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers 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.

This post was originally published on Motley Fool

Financial News

Daily News on Investing, Personal Finance, Markets, and more!