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.

Supply of all types of social housing has failed to keep up with demand over the past decade. And Home REIT is investing vast sums to soothe this shortfall. It raised £350m via a rights issue in September, almost half of which it has just spent to acquire 366 properties. The company’s acquisition pipeline is packed with other opportunities, which it’s ready to pull the trigger on, too.

Home REIT’s acquisition-led growth strategy leaves it open to a series of risks like huge unexpected costs and disappointing revenues growth. But there’s still plenty of reasons why I like this ESG share today.

A acquisition-led UK stock on my radar

Begbies Traynor (LSE: BEG) is also high on my shopping list today. This is because I think the number of corporate casualties could unfortunately be poised to soar as the British economy slows and the furlough financial support scheme ends. According to the Insolvency Service there were 1,446 insolvencies in England and Wales last month. That was an eye-watering 56% year-on-year increase.

I wouldn’t buy this UK share just because I expect profits to leap in the short-to-medium term. I think it could rate terrific shareholder returns over the next 10 years, as its acquisition-led growth strategy rolls on. Begbies Traynor operates in a highly regulated industry and future potential changes in the law could affect its profits.

Another chance to make big money!

I believe Mind Gym (LSE: MIND) could be another great company to buy for my portfolio for the next decade. This UK share has risen 133% in value over the past year alone. I expect it to keep soaring too as companies try to support workers’ mental health and improve their productivity following the Covid-19 crisis.

Mind Gym saw revenues jump 76% year-on-year in the six months to September. Sales were also up 7% compared to the same 2019 period. The business of behavioural science is booming and Mind Gym says that it’s worked with half of all FTSE 100 and S&P 100 companies. However, it’s not just the big hitters that are investing in their workforce’s wellbeing. A GlobalData survey shows that around one-third of UK small to medium-sized companies have increased their support for mental and physical wellbeing since the Covid-19 outbreak.

I also like Mind Gym’s decision to ramp up investment in its digital proposition. As a consequence, digital now accounts for more than 80% of group sales. Project overruns and disappointing returns could have a significant impact on predicted profits.

According to my figures, including dividends, the stock has produced a total annual return of 25% since 2008, that’s 15% higher on average per annum than the FTSE 100 over the same period.

Both earnings and dividend growth have helped power the shares higher. Net profit has increased at an average annual rate of 29% since 2013, supporting dividend growth of 15% per annum over the same timescale.

Is the price worth it?

This performance has undoubtedly earned the company a position in the FTSE 100 Hall of Fame. And, unlike so many other stocks that have delivered market-smashing performance, the shares remain appropriately priced today.

City analysts have the company’s earnings per share (EPS) jumping 43% in fiscal 2019, giving a forward P/E of 10.9. However, there’s a degree of risk to these numbers, because the company’s ability to hit this earnings growth target depends on the success of its integration of Europac.

DS announced that it was acquiring its Spanish competitor earlier this year in a deal worth €1.9bn. The merger is expected to make a substantial contribution to the enlarged group’s bottom line. And management also believes it can draw out synergies of €50m by combining duplicate operations.

However, as is the case with all large integration projects, there’s a risk that the merger could destabilise DS, as management focuses on integration while neglecting the rest of the business. It seems that this is what the market’s concerned about. Without concrete numbers showing the benefits of the deal, I reckon investors will continue to view DS with a degree of scepticism.

That said, I’m also excited by DS’s current valuation, so I’m willing to give management of the benefit of the doubt here. Indeed, DS has a history of successfully integrating new businesses. There’s a good chance they will hit the mark this time around as well.

That’s why I am a happy buyer of the stock at current levels. I’m also interested in the prospects for newly-listed company Mind Gym (LSE: MIND).

Founder-led 

Mind Gym describes itself as a behavioural science business that uses products to deliver “human capital business improvement solutions.” According to its website, these solutions include programmes to help employees improve at work and support management training programmes.

The business has seen a substantial boost recently from the #MeToo movement, as clients have approached the company looking for help in improving their corporate culture. This spike in demand helped profits nearly double in the last financial period to £7.8m.

What I like about this business is that it’s still manager-owned. Even though the founders pocketed £24m when they took the business public, they still hold just under 65% of the stock, giving them a strong incentive to produce the best returns for shareholders.

So, even though it is still only early days for the company’s life as a public business, I’m cautiously optimistic on its outlook. I think it could be worth a dabble at current levels, ahead of half-year results to the end of September which are expected to be released on the 4th of December.