Advertising and marketing budgets are bouncing back strongly as businesses invest to emerge from the Covid-19 crisis. XLMedia (LSE: XLM) is a penny stock which is benefitting from the media sector recovery and revenues here jumped 16% between January and June. Pleasingly, it seems as if ad spending should continue rising through 2022 at least too.
Of course, a fresh economic downturn could throw such bright forecasts off track (industry experts the Advertising Association and WARC think global advertising expenditure will rise 7.7% next year). This could be caused by a worsening Covid-19 crisis or soaring inflation, for example.
Still, it’s my belief that this threat is baked into XLMedia’s rock-bottom valuation. City analysts think earnings here will soar 152% year-on-year in 2022. This leaves the company trading on a forward price-to-earnings growth (PEG) ratio of 0.1. Any reading below 1 suggests a stock could be undervalued by the market.
Huge restructuring
Besides, I think that XLMedia’s ongoing transformation programme provides plenty to get excited about. The business — which supplies digital marketing data and operates sports, gambling and personal finance websites — is taking steps such as overhauling its data infrastructure. It’s also reshaping its global footprint to boost business and reduce costs.
Finally, I’m also encouraged by XLMedia’s commitment to growth through acquisitions. That’s even though, in theory at least, M&A action can leave a business exposed to risks like disappointing synergies and overpayment for an asset.
In late September, XLMedia snapped up BlueClaw Media for £1.8m to boost its European sports business. And it has plenty of cash on the balance sheet to continue growing its operations. I’d buy.
Take to the skies
Air Partner (LSE: AIR) is another penny stock I think could be too cheap to miss. The business trades on a forward price-to-earnings (P/E) ratio of 11 times. It’s a reading I don’t think reflects its excellent profits opportunities as private jet usage steadily grows. Oh, and this particular penny stock offers a meaty 3% dividend yield too.
Air Partner is primarily known for providing private jet chartering services. This looks likely to be a fast-growing market through to 2030 too. According to Argus Media, “demand for private business jet travel is expected to grow over the next decade as wealthier travellers migrate to more exclusive modes of travel.”
Changing traveller habits following the Covid-19 crisis are likely to give private jet usage a shot in the arm as well.
A penny stock that’s expanding for growth
I don’t think Air Partner’s just a great play on this industry however. The business has also built up a position in other aviation areas like security and safety through acquisition activity. These provide the business with extra strength through diversity as well as exposure to other potentially-lucrative areas.
Air Partner would suffer in the more immediate future if Covid-19-related travel restrictions are severely tighten. But all things considered, I think the potential rewards it could enjoy over the long haul make it a top penny stock for me to buy today.
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.
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