This small-cap penny share has unbelievable growth potential

Although I primarily focus on value and growth at a reasonable price (GARP) shares, I do like to dabble in small-cap shares occasionally. This is why I set aside a small part of my portfolio for more speculative companies. I think this penny share has many characteristics that could lead to spectacular share price growth, so I’m tempted to buy right now. 

Penny share with huge growth potential

National World (LSE: NWOR) is a recently listed media company that has gone from nothing in 2020 to having revenues of £42.1m. This is a result of its acquisition of JPIMedia Publishing. The 2 January 2021 acquisition gave National World 13 regional and city daily newspapers, plus over 100 print and online publications. 

One of the major attractions of this share for me is the quality of the management team. It seems like they have pedigree and know the media industry inside out. Chairman David Montgomery was chief executive of Local World, which was acquired by Reach in 2015. Vijay Vaghela, the COO, was most recently group finance director of Reach.

Mr Montgomery also holds about 7.5% of the shares, so his interests are well aligned with those of private investors. Unfortunately, many companies don’t incentivise directors to be well aligned with ordinary investors, which is a shame but hey ho…

The National World business model should work. Shares in Reach have been flying over the past 18 months as investors cotton on to its growth potential and digital transformation success.

Looking at it right now, it’s early days for sure for National World. There’s a lot of work still to be done. But it has a scalable business model, a strong management team, and no or very few legacy issues to deal with because it’s a new company. That makes it a very exciting investment, from my point of view.

What could go wrong?

As an acquisitive company, National World could end up overpaying for new websites and other media titles. That’s probably the main risk I’m worried about as a potential investor. 

Also, while management has experience in digitalising media assets, it’s not always an easy way to make money. In tough economic times, advertising is often cut. A change in how Alphabet‘s Google ranks websites could hit traffic. The group may not create content that leads to high levels of subscription and recurring revenue. That would also hit its profitability.

As with all companies, especially small caps, the journey with this share is likely to be rocky and testing. The shares will fluctuate – fact. However, the payoff, if management get enough things right and grow revenue and profits in the coming years, could be huge. Despite being a penny share right now, National World could become much bigger and much better known in the coming years. I’m tempted to invest, at least a little, in the shares.