The pandemic held economic activity back in 2020 and even for much of 2021. During this time, many stocks struggled. But some stocks were able to acquire significant momentum. This made them stand out as ones to at least watch, if not buy. These two penny stocks are exactly this kind. Both of them have run into some challenges recently though. This makes me want to reassess whether I would buy them or not for 2022.
DX Group: trading suspension on the horizon
The first of them is DX Group (LSE: DX). It provides mail and parcel delivery services in the UK and Ireland. The company’s share price has seen an unbelievable 37% drop in share price in today’s trading so far. It is now at the lowest levels seen in a year. It had reached multi-year highs earlier this year. But all the progress has completely been wiped out now.
And I am discouraged about why this is happening as well. DX Group is undergoing an internal corporate investigation. Because of this, it was unable to publish its annual report in time. It further says that it will not be able to do so before 2 January 2022. By then six months would have elapsed from the end of the financial period in consideration. As per the rules of AIM, where the stock is listed, this would result in trading suspension in the company’s shares. This can only be lifted once the report is published.
There is no way of knowing what the investigation will reveal. Also, we do not know when the company will publish its annual report. So, I think it is clear why the share price has crashed. Also, I do not think that we can hold out much hope for the coming days. This is a pity considering that for the full-year ending 3 July 2021, the company reported robust growth. It reported a 16% increase in revenue from the year before and it also swung back into profits. I am not going to buy it now, but it is still on my watchlist.
Mitie Group: buy on dip
Another penny stock I have long liked is the FTSE 250 facilities management services provider Mitie Group (LSE: MTO). Its stock price is still around 60% higher than what it was last year, but it too lost some momentum recently. It released its results last week for the six months ending 30 September. The next day, its share price fell 8%. However, it has started inching back up. And I reckon it could rise more. It does say that its expects short-term Covid-19 related contracts to reduce “significantly”. But I do not see that as reason enough for the share price to drop.
The rest of the results look pretty good to me. Its revenue is up 36% and its operating profits have increased by over 10 times from last year. It also expects a stronger second half of the year, which bodes well for its stock price. I’d still buy it while it is still low.