I think these penny stocks could help me make excellent returns. Here’s why I’d buy them today.
Ready to shine
I think Serabi Gold (LSE: SRB) is a great defensive share to own as insurance for when times go bad. History shows that on average a bear market happens every seven years or so. So there’s a pretty good chance that having exposure to gold — an asset which tends to rise strongly when economic conditions become tough — will pay off big time.
My main concern with owning Serabi shares is the possibility that central banks might raise rates more sharply than expected. Such a scenario would curb inflation, a natural driver for precious metal prices. On Thursday, US Federal Reserve official James Bullard said he’d like to see the central bank raise interest rates by a further 1% between now and July. This could be seriously damaging for precious metal values.
However, from a long-term perspective I still think Serabi Gold’s an attractive share to own. Forget for a moment its role as an insurance policy for investors. I’m looking beyond the possibility that gold prices could march higher if inflationary pressure keeps increasing.
I’m encouraged by the significant improvement of grades at Serabi’s Palito gold mine and the promising results from recent exploration work there. And I’m excited as the business prepares to start constructing its Coringa asset later this year. Serabi hopes to eventually produce 100,000 ounces of the yellow metal each year (the Brazilian miner produced 33,848 ounces in 2021).
At current prices of 54.5p per share Serabi trades on a forward price-to-earnings ratio of just 4.7 times. I think this is far too cheap given the company’s impressive production performance of late and its bright growth prospects. City analysts think earnings will rise 4% in 2022 before shooting 29% higher next year.
Another dirt-cheap penny stock I’d buy
I believe DP Eurasia (LSE: DPEU) is another bargain penny stock worth serious attention today. Forecasters think earnings here will rise around 500% in 2022 and by a further 50% next year. This leaves the takeaway giant trading on a forward price-to-earnings growth (PEG) ratio of 0.1 at its current price of 81p. A reminder that any reading below 1 suggests a stock could be undervalued.
I like DP Eurasia for various reasons. The online food delivery market is expected to continue rising strongly in the post-pandemic era. Growth is tipped to be especially strong in emerging markets where personal wealth levels are rising, too. Indeed, sales at DP Eurasia — which operates in Turkey, Russia, Azerbaijan, and Georgia — soared 51.5% in 2021.
I’m also a big fan of DP Eurasia because its products are especially popular with the public. As the master franchisee of the Domino’s Pizza brand in all four of its markets, it commands a considerable brand power advantage over its rivals. It’s true that the business operates in a highly-competitive arena. And consequently it will have to work tirelessly to grow profits. But I still think it could significantly bolster my wealth in the years ahead.
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.
This post was originally published on Motley Fool
