- The Australian stock market is delivering a stellar performance as investors cheer strong economic recovery.
- In the upbeat market scenario, penny stocks have strong potential for return.
- The recent undertakings of The GO2 People, including the acquisition of Skill Hire and Hunter Executive, are expected to boost the Company’s operations significantly.
The Australian financial market seems to have shaken off the COVID-19 blues, with investors’ confidence inching higher as the economic recovery quickens its pace on the back of various factors such as rising employment and government measures.
Significantly, figures from the Australian Bureau of Statistics (ABS) indicate a 1.8% uptick in GDP for the March quarter of 2021, with the Australian economy recovering to the pre-pandemic level.
Source: Copyright © 2021 Kalkine Media
Meanwhile, the stock market has been riding high in the wake of the economic data boosting investors’ risk appetite. As a result, June 2021 started on a strong note with the ASX 200 edging up nearly 7.5% on the quarter-to-date to close at 7,295.4 on 4 June 2021, registering fresh highs.
The current bull run seems to have set up a pretty upbeat scenario for penny stocks, known to offer stellar returns. A penny stock refers to the stock of a company with low market capitalisation. The shares of such companies are generally valued at less than a dollar.
Many believe that investment in penny stocks is on the cusp of a boom, thanks to the Australian government’s focus on urging various businesses to foster innovation.
Given the backdrop, let us understand why such stocks are on investors’ radar, with a spotlight on The GO2 People Limited (ASX: GO2), a penny stock listed on the ASX. GO2 is a leading provider of staffing, training and employment services throughout Australia.
Source: Copyright © 2021 Kalkine Media
Penny stocks have the potential for above-average market returns
Penny stocks have ample room to reward their shareholders, as shares of many such companies have proven to fetch their investors multibagger returns in the past. Significantly, the low market price of these stocks allows investors to buy a large number of shares.
Talking about The GO2 People, it seems to be gaining attention on the stock market front. The Company’s shares have risen in June, with GO2 stock surging 12.5% in the first week of the month. GO2 shares traded at A$0.039 on 4 June 2021.
Penny stocks could boost growth prospects
While many penny stocks remain on the radar, ferreting out the right stocks timely can prove to be a means to wealth creation for investors. Significantly, the growth prospects of such companies should be identified, with the focus on current activities on expanding business operations, attracting new customers, and increasing avenues for income growth.
In the growth context, The GO2 People delivered a solid March quarter 2021 as it recorded an uptick in gross margin, compared with the previous quarter, along with positive EBITDA and cash flow.
Also, GO2 recently completed the acquisition of Skill Hire Australia Pty Ltd, which is one of Australia’s leading providers of employment services. The acquisition is significantly earnings accretive and provides for many operational synergies between Skill Hire and the existing GO2 businesses, with the merged entity positioned to deliver immediate cost rationalisation opportunities.
Furthermore, the Company wrapped up the acquisition of Hunter Executive Search Consultants earlier in the year, the benefits of which will be seen in the June Quarter and beyond.
A perfect storm of penny stocks
The rally in the Australian equity market has propelled strong returns from a plethora of penny stocks. It has been backed by significant tailwinds in many sectors that continue to bask in the support provided by the government.
The Australian job market, where The GO2 People operates, is one such sector that has been the critical focus of several government measures. For example, the government offered unprecedented support to boost employability skills and employment numbers during the pandemic.
In addition, the recent Federal Budget clearly indicates that robust efforts in this direction would remain unfazed despite the fact that economic settings are continuously improving.
In essence, the current trends put GO2 in a sweet spot to make great strides and maximise value for its stakeholders.