Penny stocks, which are shares of companies with prices below £1 and market caps below £100m, can be risky but also offer the potential for high rewards. One such company that I am keeping an eye on is Gateley Holdings, a full-service law firm that started as a penny stock on the London Stock Exchange nine years ago.
While Gateley’s share price is currently at £1.14, down from its peak above £2.57 in late 2021, I believe that there is potential for it to bounce back soon. The company has been innovative in the industry, being one of the first UK law firms to seek external investment through an AIM floatation. It has also made strategic acquisitions in non-legal sectors, contributing to revenue growth and diversification.
Despite a recent 15% drop in half-year adjusted operating profit and some uncertainty surrounding full-year guidance, Gateley offers an attractive dividend yield of 8.3%. Additionally, its valuation is appealing with a low forward P/E ratio of 6.8, indicating potential overselling of the shares.
While there are risks associated with investing in a listed law firm, I believe that Gateley’s strong fundamentals and growth strategy make it a worthwhile consideration for potential share price recovery. Time will tell if the company’s cautious approach to forecasting its performance pays off, but I see potential for a positive outcome.
In conclusion, Gateley Holdings presents an opportunity for investors looking for a high-yield stock with recovery potential. It’s important to conduct thorough research and consider all factors before making any investment decisions.