With £500 to invest in a penny stock for my holdings, I would add Science in Sport (LSE:SIS) shares to my portfolio at current levels. Here’s why.
Sports nutrition specialist
Science in Sport is one of the world’s leading performance and nutrition brands dedicated to enhancing sports performance. Its products are derived through scientific formulations and cutting edge technology to provide optimal performance solutions and nutritional needs. SIS partners with over 150 football teams throughout the world, as well as the English Institute of Sport, USA Triathlon team, the German Cycling Federation, and others.
Penny stocks are those that trade for less than £1. As I write, Science in Sport shares are trading for 71p per share. At this time last year, the shares were trading for 44p, which is a 61% return in a 12-month period. The shares have surpassed 2020 pre-market crash levels.
Why I like SIS
The healthcare and gym market has been booming since the pandemic started. The pandemic shone a new light on the importance of healthcare and remaining fit and healthy. In addition to this, many gyms closed for long periods, so many resorted to home workouts. When gyms reopened, many saw lots of new members. SIS is primed to benefit from this through its product range of consumer performance and nutrition goods. SIS also has a direct selling arm so does not have distributors or agreements with gyms meaning it can keep more of the revenue.
SIS’s performance recently and historically has been promising too, although I realize that doesn’t future performance. Looking back, I can see that revenue increased year on year for four years until 2020. Gross profit also increased in the same period. This shows me SIS has been growing well and performing well consistently. SIS yesterday released a pre-close update for 2021 results. For the period ended 31 December, it said it expects to report revenue and EBITDA growth compared to 2020 levels. SIS’s net cash balance looks healthy but has declined compared to 2020 due to investment in new brands and online platforms and infrastructure. This seems to have helped as online sales grew as per the recent report.
Risks and verdict
The sports performance and nutrition market is extremely lucrative and competitive. My concern here is although Science in Sport is a burgeoning brand with some excellent relationships and real long-term promise, there are other better known firms in the market. In addition, bigger consumer goods firms could join the market with established business models, a built-in customer base, as well as millions to spend on research and development and products too.
Overall, I would happily add Science in Sport shares to my portfolio with £500 to invest right now. I am eager to see full-year results in their entirety soon and believe growth across all areas could catapult shares upwards even further. As penny stocks go, SIS represents a bargain in my eyes with an established brand, business model, and record to back it up.