Understanding Penny Stocks and Their Potential
Penny stocks are not suitable for every investor. These shares are typically high-risk investments, which means they come with a greater degree of uncertainty compared to more established stocks. However, for those who have a higher risk tolerance, penny stocks can be an interesting addition to a diversified portfolio. With that in mind, there is one stock that stands out as worth considering at the moment.
A Tech Company on the Rise
The stock in focus today is Made Tech (LSE: MTEC). It is listed on the UK’s Alternative Investment Market (AIM) and is currently trading at 36p. With a market cap of £54m, Made Tech is a technology company that provides digital services to government organisations and regulated industries. Its primary goal is to assist with digital transformation, a significant trend in the current business landscape.
Made Tech aims to help its customers in several key areas:
- Modernise legacy technology and working practices
- Accelerate digital service and technology delivery
- Drive better decisions through data and automation
- Enable technology and delivery skills to build better systems
This approach can be described as a ‘picks-and-shovels’ play on the digital revolution, meaning it focuses on providing tools and services rather than directly participating in the broader tech boom.
Why Made Tech is Attractive
There are several reasons why Made Tech has caught my attention. One of the most compelling factors is its impressive revenue growth. The company recently announced that for the year ended 31 May 2025, it expects to deliver revenue of around £46.4m. This would represent a 20% increase year on year and a staggering 750% growth from five years earlier. Notably, this figure was ahead of expectations, and the company also stated that revenue for the current financial year will be ahead of projections.
Made Tech is benefiting from the UK government’s push towards digital transformation. In the most recent trading update, CEO Rory MacDonald highlighted that the government’s renewed focus on digital transformation and data as a growth asset has reinforced a growing long-term market opportunity with “clear demand for modern digital technology and the potential for sustained returns.”
Another positive aspect is that the company is now profitable, which reduces some of the inherent risks. For the most recent financial year, adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) are expected to be £3.4m, up 42% from the previous year. The balance sheet also looks strong, with £10.4m in cash and no debt on its books.
Finally, the stock is currently in a strong uptrend. Over the past year, it has risen by approximately 120%, making it an appealing option for investors looking for growth.
Considerations and Risks
Despite these positives, there are still risks to consider. A significant portion of Made Tech’s revenue comes from the UK government. If the government were to reduce its spending on digital transformation, the company’s growth could slow down.
Another risk factor is the potential selling of shares by insiders. Recently, it was announced that a director who has been with the company for 13 years and owns a substantial amount of stock is stepping down.
Final Thoughts
Overall, I see a lot of potential in Made Tech. If you are comfortable with taking on risk, this penny stock may be worth considering. However, as with any investment, it is essential to conduct thorough research and understand the risks involved.
Before making any decisions, it is advisable to review additional information and analyses. There are various resources available that provide insights into different investment opportunities, helping investors make informed choices. Whether you are looking for long-term growth or short-term gains, understanding the market and your own risk profile is crucial.
