Stock market

I think the 1 penny stock has legitimate upside potential.

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A penny stock is one I like. Revolution Beauty Group (LSE: REVB).

Not all small caps can become market leaders or blue chips. Many fail due to lack of financial strength, or are taken over by large firms.

However, I think the revolution could see itself grow, and provide me with some juicy returns. Here’s why.

Beauty is hidden in the eye of the beholder

Revolution is a beauty and personal care business that sells multiple brands. It does this directly to consumers and also through wholesalers.

The shares are going up and down like an exciting roller coaster that I used to enjoy when I was (very) young. They are currently trading for 24p, which is exactly the same level as this time last year. However, to be specific, in 2022, shares have previously crossed the 100p mark.

Boardroom politics have hurt Revolution in recent days, which may have held back shares. High-level departures, and rising stakes in the fast-fashion business BohoIn my eyes, has been problematic.

With all this being said, I am not surprised that institutional investors want to see the lay of the land regarding the leadership and direction of the firm. Also, full-year results for the period ending February 2024 are yet to be released.

An investment case

Continuing the theme of issues and risks, instability is a concern in the boardroom. This can affect the direction of the business, which can harm operations, earnings and investor sentiment. This is something I will keep a close eye on.

Next, the beauty market is very competitive, and margins aren’t always the greatest, especially with current inflationary pressures. As I mentioned above, a big player can take over a business, or make it completely non-existent.

However, it’s not all doom and gloom in my eyes. Forecasts indicate the firm’s first profitable year since an initial public offering in 2021 is on the cards. This can be huge for business and shares. However, I am aware that predictions do not always come true. Also, the firm has a decent looking balance sheet, which is always positive for small caps.

Since then, the business has managed to make a great stride despite the fact that it has not been around for a long time. It includes a wide geographical margin as well as key wholesale relationships.

Finally, from a general perspective, the beauty market is a fast-growing market that shows no signs of slowing down according to data giant Statista. This can be good news for the business and its growth aspirations.

what am i doing now

Looking at recent events, the general market scenario and the historical performance of share prices, I am bullish on Revolution. I think this stock has the potential to climb much higher.

I would be willing to buy a small number of shares at just 24p per share when I can and see what happens. I’ll be marking my calendar for the full year’s results, and hopefully boardroom unrest is now a thing of the past!

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