A penny stock typically refers to the stock of a company that trades for less than N1 per share. They are often bought and sold in high volumes. Penny stocks don’t cost much money and promise big profits.
Penny stocks come with high risks and the potential for extraordinary returns, so investing in them requires care and caution. While the risks associated with trading penny stocks are high, investors can make profit from them.
Some penny stocks have very low volume, which means that it can be very difficult to buy and sell shares of these stocks. Other penny stocks are very volatile and have huge up and down price swings.
Penny stocks are built on short-term trades, so it is as important to know when to sell as it is when to buy. It is rare for a penny stock to be a long-term buy-and-hold investment. If you have made sizeable gains over a short period in a penny stock, it is advised that you take your profit now rather than waiting for bigger profit.
Let’s take a quick look at a few penny stocks within the limit of space.
TRANSCORP PLC
The share price of Transcorp is currently trading at 61 kobo. Within the last 52 two weeks, the share price has touched a high of N1.18 and a low of 54 kobo. The Q2’20 earnings per share of Transcorp is 2 kobo, down by 83.13% from the EPS of 11 kobo achieved in Q2’19. Relative to the share price of 60 kobo, the P/E ratio of 31.68 is estimated for Transcorp which is significantly high.
Year to date, the share price of Transcorp has lost 39.39% and 49.15% from a year high of N1.18. At that Transcorp has an upside potential of 49.15%.
Going by its book value of N2.73, relative to the share price of 61 kobo, Transcorp is considered cheap.
On the technical indicators, a Strong BUY is recommended for Transcorp.
UAC-PROPERTIES
UAC Properties Development Company is a subsidiary of UAC of Nigeria Plc.
Custodian Investment recently signed an agreement with UAC of Nigeria Plc to purchase a 51 percent equity interest in UACN Property Development Company PLC (UPDC) from UAC.
Investors should exercise caution when dealing in the stocks of Custodian, UAC, and UPDC until requisite approvals are obtained as regards the sale transaction.
Currently trading at 92 kobo, the share price of UAC Properties in the last 52 weeks has touched a high of N1.57 and a low of 74 kobo.
The firm declared a negative earnings per share (-N0.16) in its Q2’20 result. Relative to the share price of 61 kobo, P/E ratio is -5.18.
Going by the book value of N0.80 being lower than the current share price of N0.92, it can be said that UAC Properties is overvalued.
On the technical chart, William’s %R and Stochastic indicated that the stock is overbought.
CONSOLIDATED HALLMARK INSURANCE
An additional 2.03 billion ordinary shares of Consolidated Hallmark Insurance was listed on the Nigerian Stock Exchange on Thursday 20th August, 2020. The additional shares is from the Company’s Rights Issue of 2.03 billion ordinary shares of 50 kobo each at 52 Kobo per share on the basis of 1 new ordinary shares for every 4 ordinary shares held as at 3 February 2020.
The price of the underwriting firm has been trading flat at 37 kobo since 13th August till date.
The price of the firm last week was adjusted from 37 kobo to 35 kobo for bonus of 1 for 15 declared by the company.
Q2 earnings per share of 3 kobo, relative to the share price of 37 kobo, brings the firm’s P/E ratio to 12.33x which is considered high.
Stochastic and William’s %R both indicated the stock is overbought while MACD gave a SELL signal. Overall on the technical chart, a BUY recommendation is given for Consolidated Hallmark Insurance.
Looking at the book value of the stock at 65 kobo, the stock is still considered cheap, relative to the current share price of 37 kobo.
HONEYWELL FLOUR MILLS
Honeywell Flour Mills proposed a dividend of 4 kobo to its shareholders in its audited report for the year ended 31 March 2020. Currently trading at 94 kobo, the share price of the firm has touched a high of N1.18 and a low of N0.79. Year to date, Honeywell Flour has lost 5.05% of its share price and 20.34% of its year high of N1.18.
Going by the book value of N7.22, relative to the share price of 94 kobo makes the stocks cheap at the current price.
On the technical chart, a BUY signal is recommended for Honeywell Flour Mills.
AIICO INSURANCE
The Q2 earnings per share of AIICO Insurance for 2020 is 25 kobo. Relative to the current share price of 91 kobo, a low P/E ratio of 3.64 suggests that the stock is cheap at the current price. Year to date the share price of AIICO insurance has gained 26.39% from 72 kobo as at 31 December 2019 to 91 kobo as at 21 August 2020. In the past 52 weeks, the price of the stock has ranged between a high of N1.22 and a low of N0.61.
On the technical chart, most indicators including MACD, William’s %R and Stochastic indicated a strong SELL for AIICO Insurance.
Going by the book value of N2.79, and the current share price of 91 kobo, the stock of AIICO Insurance is considered cheap.
PRESTIGE ASSURANCE
For more than one week, the share price of Prestige Assurance has been static at 53 kobo.
Year to date the share price of Prestige Assurance declined by 3.63% from 55 kobo as at 31 December 2019 to 53 kobo as at close of trade on Friday, 24 August 2020. Within the last 52 weeks, the share price of the stock has ranged between a high of 71 kobo and a low of 39 kobo. Relative to its year high of 71 kobo, Prestige Assurance has an upside potential of 25.35%.
Stochastic, Williams %R and MACD are giving a SELL signal for the stock of Prestige Assurance.
On the strength of the Book value of N1.43, relative to the current price of 53 kobo, Prestige Assurance is considered cheap and growth potential.
WEMA BANK
Wema Bank is currently trading at 51 kobo. Within the last 52 weeks. The share price has touched a high of 80 kobo and a low of 44 kobo.
Year to date, Wema Bank has lost 31.08% and 36.25% of its year high of 80 kobo.
With 2020 Q2 earnings per share of 4 kobo and current price of 51 kobo, Wema Bank has a P/E ratio of 13.16
On the technical chart, MACD and William’s %R gave SELL signal for the stock.
Going by the bank’s book value of N1.43 and the current share price of 51 kobo, Wema Bank’s stock is a bargain at the current price.
CORNERSTONE INSURANCE
The share price of Cornerstone Insurance is currently trading at 58 kobo. Year to date it has gained 28.89% from 45 kobo on 31 December 2019 to 58 kobo as at Friday, 21 August 2020. In the last 52 weeks the price of the underwriting firm has touched a high of 68 kobo and a low of 17 kobo.
With Q2 earnings per share of 6 kobo, and the current share price of 58 kobo P/E ratio of 9.96x is estimated for Cornerstone Insurance.
Cornerstone Insurance has a book value of 91 kobo, relative to the current price of 58 kobo, we can infer that the stock has potential of appreciating in value.
On the technical Indicators, a SELL signal is given by most indicators for Cornerstone Insurance.
WAPIC INSURANCE
Currently trading at 33 kobo, the share price of Wapic Insurance in the last 52 weeks has touched a high of 40 kobo and a low of 20 kobo. Q2 earnings per share of 3 kobo, relative to the share price of 33 kobo, gives a high P/E ratio of 12.10x.
The stock is trading below its book value of N1.01, and this suggest that the price of the stock has tendency to rise.
LAW UNION & ROCK INSURANCE
Law Union & Rocks for the past one week has been trading flat at N1. Year to date the underwriting firm has grown by 50% and has lost 18% of its year high of N1.12.
Going by its book value of N1.71, the stock is considered cheap at the current price of N1.