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There are many UK stocks trading in pennies right now. According to my data provider, there are about 800 stocks in London Stock Exchange today he trades for less than £1.
Now, not all of these companies are worth investing in, of course. There are many low quality businesses in that group of stocks.
But there are absolute gems too. Here is one that I think is worth considering today.
28p growth stock
hVIVO (LSE: HVO) is a small company in the healthcare sector specializing in clinical and laboratory testing services. Headquartered in London, it provides early-to-end clinical development services to large, established, and growing repeat clients, including four of the world's 10 largest biopharma companies.
Currently, shares in hVIVO trade for just 28p. At that share price, its market cap is around £189m.
Amazing growth
From an investment perspective, hVIVO is very serious about it, in my opinion.
First, it is growing at an amazing rate. Over the past three years, revenue has risen from £20.6m to £56m – a 172% increase. This year and next, analysts expect revenues of £61.9m and £67.7m.
It is worth noting here that the company's target revenue is £100m by 2028. So it clearly expects growth to continue in the coming years.
One thing that should help drive growth is its new state-of-the-art facility at Canary Wharf. This should make the company grow faster.
Generating profit
Second, the company is now profitable. This year, analysts expect hVIVO to generate net profit of £9.1m and earnings per share of 1.41p. Profitability is important because it reduces risk for investors. They also make it much easier for companies to advertise themselves.
Good balance
As for the balance here, it looks attractive to me. Currently, the forward price-to-earnings (P/E) ratio is 19.7, falling to 16.4 using the 2025 consensus earnings forecast.
Given the growth the company is producing, we seem to have a 'growth-at-a-reasonable-price' (GARP) stock. Over the years, I have found that GARP stocks tend to outperform the market over time.
Dividend growth
Finally, there are assignments offered as well. The yield here is not great (0.8%) as the company started paying dividends last year.
But the pay is growing and I see the opportunity for big increases in the coming years. That's because the dividend coverage ratio (the ratio of earnings to dividends) is much higher than six.
Lots of energy
Now of course, there are a few risks to consider here. Another is profitability volatility, which is very common in growing companies. This can lead to volatility in the share price in the future.
Some are complications from clinical trials. This situation may also lead to a weaker stock price.
Overall, I believe this stock has a lot of potential. Of the six buyers who cover it, three rate it as a Buy and three have it as a Strong Buy.
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