Stock market

Cheap Penny Stocks for Investors to Consider in June!

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Investing in penny stocks is a high-risk, high-reward strategy.

On the downside, the prices of these small-cap companies can be extremely volatile. Heavy selling of their shares may occur when industry or economic conditions deteriorate and concerns for their survival increase.

But when investors get it right, buying young companies when they trade below £1 can deliver fantastic – and in some cases, life-changing – returns. This is because these stocks may have better growth (and therefore share price) potential than the broader stock market.

Everyman Cinema Group (LSE:EMAN) is a company that I think is an appealing long-term investment. And after the recent weakness in share prices, I believe it deserves serious consideration by astute investors.

Everyman's Share Price Performance Since 2019
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Industry pressure

Investing in cinema stocks has been a risky strategy since the end of Covid-19. Changes in viewing habits and the movie studio model mean box office returns are some way off pre-pandemic heights.

Weak bookings over the US Memorial Day weekend underscored the scale of the problem. Despite the high profile release Furiosa: A Mad Max Saga And GarfieldThe US box office suffered its worst performance since 1995.

So why on earth would I consider buying shares of Everyman?

In short, this bog offers more than a standard movie theater, which means it’s more flexible to the state of the wider cinema industry.

To fly high

gave the aimThe -listed firm operates 44 venues across the UK, from which it screens the latest blockbusters, silver screen classics, independent films and special film events. Patrons can also grab some food at its restaurant and have a drink delivered to their seat.

This has proven to be a winning formula. As each person explains: “With a focus on hospitality, Everyman is redefining how film is being consumed and is therefore outpacing the wider cinema market.

The latest financials in April show how its business model is thriving. Admissions increased by 9.5% to 3.75 million during 2023, while the average ticket price increased by 3.2% to £11.65.

With spending per head on food and drink – up 10.2% year-on-year to £10.29 – sales are up 15.3% from 2022 levels to £90.9m.

Growth potential

The compelling results of each reveal the broader issues of the cinema industry. And the business – which increased its market share last year by 30 basis points to 4.8 percent – believes it can continue to grow strongly.

Last year it opened four organic cinemas during the year. It also acquired two Tivoli cinemas in December after previous owner Empire Cinemas went into administration.

Consumers in the UK are feeling the pinch, and Everyman sales could cool if economic conditions remain tough. But I believe the ultimate rewards this money stock can deliver still make it a top buy.

And especially at current prices too.

A bargain penny stock

After the end of the epidemic, the losses are decreasing rapidly. But the company is not expected to turn a profit until 2025. This means that the price-to-earnings (P/E) ratio is not available.

Price per person to book price (P/B).
Created with TradingView.

However, Everyman’s Price-to-Sales (P/S) ratio can be used to estimate its value. And today, it sits at just 0.5, comfortably below the value benchmark of 1.

All things considered, I think value investors should take a closer look at this overperforming penny stock.

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