Business & Investment

Should I buy this penny stock 1 or should I avoid it? This is my verdict!

Penny stocks are considered high risk and high compensation.The possibility of a penny stock I’m thinking of Idox (LSE: IDOX)..It may be a good growth choice My portfolio Or should I avoid buying stocks?

Software provider

Idox is a UK-based company specializing in digital solutions, especially information management software. The software aims to simplify complex tasks and operations and effectively manage information within an organization.

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Idox has a customer base spanning the UK and abroad and employs more than 600 people with operations in eight countries. Sales sectors include government, medical, transportation, engineering, and construction.

Penny stocks are traditionally identified as trading for less than £ 1. Today, as I write, Idox shares are trading at 73p per share. At this point last year, the stock was trading at 49p. That’s a 48% return in 12 months. It is worth noting that stock prices have exceeded the pre-pandemic market plunge level.

Currently, Idox shares are trading near record highs. Idox’s share price reached a similar level in 2018, before profit warnings and some obstacles led to a decline in the share price.

Agree and disagree

To make a decision on the feasibility of investing in Idox, I have put together the pros and cons of the debate.

for: Idox has a history of acquisitions. When I’m considering the feasibility of a company’s investment, I’m often favored by any company that buys other businesses to enhance its offerings and profile.For example, Idox Presentation 2 Acquisition In the last 6 months. Both of these include swallowing small businesses that offer similar products or are backing their current offerings.

Against: Unfortunately, Idox has had some problems in the past and looks back on 2018. Restructuring had to be done in the event of contract delays, revenue recognition accounting issues, and unlucky acquisition issues. I often refer to positive historical achievements, so I must also be aware of negative history. I have to be aware of this because companies don’t always learn and the mistakes of the past can be repeated. It’s not uncommon to see this, as penny stocks may often be checking the past.

for: Looking at recent performance, Idox issues may be a thing of the past. Revenue and gross profit increased year-on-year in both 2019 and 2020.latest Transaction updates A six-month semi-annual report to April 30 was released in August. Overall, it was encouraging. Revenue increased 4% (excluding the recently disposed content business as it focuses primarily on software). Like net cash, profits and EBITDA increased. Performance seems to be consistent and the problem can be a thing of the past.

Against: The competition in the software market is fierce and saturated. My concern is that Idox is a small fish in a very large pond. Idox can be spent and defeated by larger competitors.

Penny stocks I should buy or avoid?

Overall, I think Idox is a good growth choice. I think we can continue the upward trajectory. I would like to add a little share and keep an eye on development for now.

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Jabran Khan does not have a position in any of the shares mentioned. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by exploring different insights, Better investors than us.

Should I buy this penny stock 1 or should I avoid it? This is my verdict! Should I buy this penny stock 1 or should I avoid it? This is my verdict!

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