A little over a year ago, AIM-listed Mind Gym (LSE: MIND) was a penny stock. But the stock market rally of last November changed its fortunes. It quickly rose above 100p and has consistently stayed there through 2021. It is at more than double those levels now. And this is when the stock has already declined slightly in the last few months.
Good performance
I think this is an encouraging place for me to explore the merits of the almost-penny stock further. The company, with a market capitalisation of around £170m, is clearly not small. And its latest results show that it is recovering fast from the pandemic too. For the six months ending 30 September 2021, the company’s revenues grew by a massive 67% compared to the corresponding period in 2020. Also, after crashing into losses last year, it has now managed to break even.
I also like the fact that for the last year and a half, which is essentially through the pandemic, there has been only one period of six months when it reported losses. And that was in the first six months of lockdowns in 2020, between March and September. For the past year, it has clocked either a net profit or broken even.
It is also positive about the future. As per CEO Octavius Black “…we have demonstrated our ability to grow revenues… Mind Gym remains well placed to adapt and prosper in the vast, growing and rapidly evolving corporate change, learning and wellness market”.
Trading below pre-pandemic levels
Despite this, the stock is yet to go back to its pre-pandemic levels. In early 2020, it had touched a high of 204p, so right now it is still trading some 20% below that level. Considering it progress over this time, I think its share price could rise more.
How much it rises, of course, depends on the pace of recovery. The Omicron variant is still a bit of an unknown, and has sparked off some panic. Additionally, winters make us more vulnerable even with vaccinations. My point is that we should not take it for granted that the pandemic’s market impact might be over. The stock markets are highly reactive these days even to relatively small developments that could potentially portend some serious bad news.
And Mind Gym is in a segment that could be particularly susceptible to a decline if there is another slowdown. When companies are struggling to make ends meet, professional skill development might be put on the back burner, important as it is, in my view. Besides that, financially, Mind Gym’s bounce back has been relatively strong compared to last year, but not so much compared to the year before, which was the last pre-pandemic year.
Would I buy this almost-penny stock?
Keeping this in mind, I would like to wait a while before making a decision on whether to buy the stock or not. It is a good stock in my view, but I still think that it could face some challenges in the near future if the economy continues to stay weak. I will keep it on my watch list though, and focus on buying other cheap stocks right now.