A few notable penny shares have risen in popularity recently. Are we looking at some undervalued UK stocks to buy in November? Here are three that catch my eye.
Back to the future
We just saw a remarkable jump in the Cineworld (LSE: CINE) share price.
After news that the cinema chain has made progress in its Chapter 11 bankruptcy proceedings, Cineworld shares have more than trebled in price. They settled back a little but, at 6p as I write, they’re changing hands rapidly.
We’re still looking at a 90% price fall over the past 12 months. So it’s clearly too early to think everything’s fine again now. But at least the latest agreement to start paying some rents has cleared the way for Cineworld to access more cash and make some debt repayments.
I think anyone considering buying Cineworld now needs to carefully examine its long-term prospects. I do think those are improving. But even if the company succeeds in finding a rescue package, we’d need to think about how much dilution current shareholders will end up facing.
Wood and carbon
Woodbois (LSE: WBI) has been a bit of a storied stock in 2022. Its share price spiked earlier in the year, but then fell back. And it’s had quite a volatile long-term ride.
The company is expanding in the renewable hardwood business in Africa. And it also plans a foray into carbon credits. The latter hasn’t reached its trial phase yet, so it will be some time before it can contribute anything.
With the Woodbois share price back down to 2.5p, as I write, is this a penny stock to buy now? The main concern I have is over cash.
Woodbois is just turning the corner into operating profit as revenues are rising impressively. But it’s some way from becoming cash flow positive yet, and the annual cash burn rate is rapidly depleting the balance sheet.
I see potential profit, but I have no idea how long that will take to turn into cash. Or how much more funding will be needed to get there.
My final pick is not actually a penny share, at the time of writing, but it was priced below 100p the day before.
I’m talking about Aston Martin Lagonda (LSE: AML), which has been hovering either side of the penny share limit since early October. Right now, Aston Martin shares are down 94% in the past 12 months.
The latest weakness comes on the back of disappointing Q3 figures, and a downgrade in full-year expectations. Revenues increased 16% year-on-year. But the quarter’s pre-tax loss soared to £511m, from £189m a year previously.
Do investors now have a chance to snap up Aston Martin shares at a super low price? We’re back to that same issue again of not knowing when profits are likely to show up, or how long the cash will last before more is needed.
Would I buy any of these? I see potential in all of them, and they might turn out to be good buys now. But they all face too much uncertainty and risk for me. So I’ll just keep watching.
Alan Oscroft 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.
Motley Fool UK 2022