Penny stocks like Topps Tiles (LSE: TPT) and Michelmersh Brick Holdings (LSE: MBH) have seen their share prices drop significantly in recent years. Topps Tiles, a company that sells tiles and flooring products, has lost close to two thirds of its value over the last decade. The pandemic, along with inflation and high interest rates, have made it difficult for consumers to spend on home improvements.
Despite tough trading conditions in the first half of 2024, Topps Tiles has managed to maintain a net cash position of £19.3m. Forecasts suggest that earnings growth is expected to improve in 2025, with the price-to-earnings ratio dropping to eight by 2026. While it may be risky to invest in consumer-dependent penny stocks like Topps Tiles, there is potential for growth in the next decade.
Similarly, Michelmersh Brick Holdings has also faced challenges due to the construction slump. However, results for the 2023 full year exceeded expectations, with EBITDA rising by 6.6%. The company has net cash of £11m and is well-positioned to weather any further industry downturns.
Both Topps Tiles and Michelmersh Brick Holdings offer attractive dividend yields, with Michelmersh at 4.7% and Topps Tiles at 8.7%. Despite the risks associated with penny stocks, the potential for rising earnings and falling price-to-earnings ratios make them worth considering for investors focused on the long term.
Market sentiment and the flow of money back into the stock market could impact the performance of these penny stocks in the coming years. While the current mood for penny stocks may be subdued, investors looking ahead to the next decade may find opportunities in companies like Topps Tiles and Michelmersh Brick Holdings.