The Marston’s share price is rising. Should I buy this penny stock now?

It goes without saying that pretty much any company operating in the hospitality industry has been knocked for six by the Covid-19 pandemic. With the UK now just-about-fully unlocked and people more desperate than ever for normality to return, is now the time for me to loading up on their shares? Today’s rise in penny stock pub group Marston’s (LSE: MARS) share price would suggest so. 

Marston’s share price: in recovery mode

Pub closures meant that Martson’s first half was pretty much a write-off. The ‘rule of six’ and table ordering held back trading even once it was allowed to welcome people back through its doors in May. 

Positively, things have really started recovering since then, according to today’s trading update. Total sales (drinks and food) between 12 April and 16 May were at 77% of those in 2019 (before the pandemic arrived). From then until 24 July, however, the percentage rose to 92%. 

In fact, sales have been better than the company predicted thanks in part to the postponed Euro 2020 tournament finally being allowed to happen. Investment in outside areas also appears to have paid off.

Speaking today, CEO Ralph Findlay reflected that the pandemic had been “extremely difficult” for the company but that the “pent-up demand and the rapid return of customers” meant he was now “confident” in its future.

Notwithstanding this, he did sound a cautionary note on the Marston’s outlook. Near-term trading would continue to be “uncertain and operationally disrupted“, he said. Future messaging from Boris Johnson will clearly play a big role in how swift the recovery will be.

So, is now the best time to buy?

An abrupt response to the question of whether now is the best time to buy would be a simple ‘no’. The best time to snap up this pub group was when it was on its knees last year. Since July 2020, the Marston’s share price has more than doubled in value — yet more evidence that buying when everyone else is selling has the potential to pay off handsomely. 

Of course, hindsight is always a wonderful thing. I can name all sorts of companies I should have invested in last year but didn’t. So, a better question for me to ask would be: “Can I still make money on this penny stock?‘

I think I can. Based on declining infection rates, it appears we’ve seen the worst of Covid-19. Assuming demand at pubs continues to rise, Marston’s could finally find itself in calmer waters.

That said, there are a few other things to bear in mind. In Marston’s line of work, competition isn’t exactly thin on the ground. Yes, an estate of around 1,500 pubs helps, but if I were looking for a business offering a wide economic moat, this wouldn’t be top of my list. The huge amount of debt on the balance sheet isn’t exactly attractive either.

A cautious buy

No one knows for sure where stocks will go in the near term. However, I suspect we could see more upside from the Marston’s share price over the next few months. The removal of restrictions combined with the perfect beer-drinking weather we’ve seen should mean its next set of numbers will be far better.

All told, I’d now rate this penny stock as a cautious buy for my own portfolio.