Investing in penny stocks is not for the faint of heart. While the rewards from these stocks can be substantial, so too can the risks. If one is comfortable with share price volatility, however, these small-cap stocks can be worth considering as they can offer the potential for explosive long-term returns. With that in mind, here’s a look at five high-risk/high-reward UK penny stocks to check out for 2025.
Corero Network Security
Over the next decade, the cybersecurity industry is likely to experience significant growth as the world becomes more digital. And one London Stock Exchange (LSE) company that could benefit from this industry growth is Corero Network Security (CNS:LON).
It’s a British cybersecurity company that specialises in Distributed Denial of Service (DDoS) protection solutions (a DDoS attack is a malicious attempt to disrupt a server, service, or network by overwhelming it with a flood of traffic). Listed on the LSE’s Alternative Investment Market (AIM), it currently trades for 19p (putting its market cap at £95 million).
Looking beyond the long-term story associated with the growth of the cybersecurity industry, there are several reasons I’m bullish on this stock. One is that recent trading has been strong. In early January, the company advised that for 2024, revenue increased +10% to $24.6 million. It also said that EBITDA for the year was expected to grow to between $2.1 million to $2.5 million from $1.8 million in FY2023.
Another reason is that there has been some insider buying recently. On 22 January, it came to light that both the CEO and the CFO had just snapped up some CNS shares.
Now, profits here are still small and therefore the stock’s valuation is high. Currently, the price-to-earnings (P/E) ratio here is about 57. This high earnings multiple obviously adds risk. However, with earnings per share (EPS) forecast to double this year to 0.4 cents, I’m comfortable with the valuation.
PCI-PAL
Another industry that is set to experience rapid growth in the years ahead is electronic payments. And one LSE company that offers exposure here is PCI-PAL (PCIP:LON).
It provides cloud-secure payment solutions for companies’ contact centres. And it has some big-name clients including the likes of Virgin, Ikea, Halfords, and DHL.
What stands out to me here is the level of top-line growth. Over the last five financial years, revenue has grown from £2.8 million to £18 million (an increase of 543%). This financial year (ending 30 June 2025), analysts expect revenue of £22.4 million. That would represent year-on-year growth of 24%.
It’s worth noting that the company recently put out a strong H1 FY2025 trading update. Here, it advised that it had just had its best H1 on record. “This is an exciting time for PCI-PAL as we continue to evolve our plans to best capitalise on the opportunity in front of us. Given the progress being seen in the business, supported by our strong sales pipeline, we are confident in the outlook of the group,” commented CEO James Barham.
Now, I expect this 72p penny stock to be volatile. Not only is it a tiny company (market cap of £52 million) but it also has small profits.
I think it could do well in the years ahead though. If revenue continues to climb, so should the share price.
Cordel Group
Artificial intelligence (AI) continues to be a hot investment theme and one penny stock that offers exposure here is Cordel Group (CRDL:LON). It specialises in technology solutions that allow transport companies (e.g. rail operators) to capture and analyse large datasets with AI.
Now, this is a very small company. At its current share price of 7.25p, its market cap is just £16 million. Therefore, it’s at the higher end of the penny stock risk spectrum. Stocks of this size tend to be thinly traded (meaning they’re often not very liquid).
Recent H1 results for the six-month period to 31 December 2024 were encouraging though. For the period, revenue came in at £2.3 million – up 18% year on year at constant currency. And management provided an upbeat outlook. “We made excellent progress on many fronts in the first half, setting up for a strong second half for both customer wins and technology development,” said Chairman Ian Buddery.
It’s worth pointing out that Cordel has already announced several contract wins this year. On 8 January, it announced a new contract with Angel Trains. Then, on 13 January, it announced a new contract with Network Rail. So, it appears to have a lot of momentum right now.
1Spatial
Another small UK company that is active in the data space is 1Spatial (SPA:LON). It helps government, utility, and transport organisations make sense of their location data.
This penny stock looks interesting to me for several reasons. One is that the company has generated consistent top-line growth in recent years. Over the last five years, revenue has risen from £17.6 million to £32.3 million (an increase of 84%). For the year ending 31 January 2025 (FY2025), analysts expect revenue of £36.2 million.
Another is that near-term earnings are forecast to rise substantially. For FY2025, analysts expect 1Spatial to generate earnings per share (EPS) of 1.68p. However, for FY2026, they expect EPS to come in at 2.73p. That would represent EPS growth of 63% and that kind of earnings growth could push the share price higher.
At today’s share price of 67p (market cap of £76 million), the forward-looking P/E ratio here is 25. That seems reasonable to me given the growth track record I highlighted above. The risk with this type of stock, however, is that earnings forecasts can be inaccurate. That’s something to keep in mind – the stock may not be as cheap as it appears to be.
Skillcast
Finally, we have Skillcast (SKL:LON), which trades for 43p. It’s a software-as-a-service (SaaS) company that offers compliance and e-learning solutions and currently has a market cap of £38 million.
This is an impressive little company. Today, it serves over 1,200 businesses including the likes of Schroders, Puma, and GKN Automotive. And it has generated decent growth in recent years. Between 2018 and 2023, revenue climbed from £5.6 million to £11.3 million.
Looking ahead, analysts expect to see further growth. For 2025, the company is expected to generate revenue of £15.4 million. That compares to a forecast of £13.3 million for 2024. As mentioned earlier, however, forecasts can be off the mark in this area of the market.
That said, Skillcast recently provided a trading update, and it read well. “We expect that our SaaS business model and innovative product releases, like Aida – our AI digital learning assistant, will continue driving ARR growth and increasing EBITDA margins further in 2025,” said CEO Vivek Dodd.
One thing that stands out to me with this company is that it has a strong balance sheet and already pays dividends. At the end of 2024, the company had £9.1 million net cash on its books (roughly 10p per share). This strong cash balance means the company is unlikely to suddenly announce a capital raise (which is common in the penny stock world). It also gives the company plenty of firepower for acquisitions and shareholder returns.
In terms of the valuation here, it is a little on the high side. Currently, the forward-looking P/E ratio is about 32. However, when we strip out the huge cash balance, the valuation is far more reasonable at around 24. And with earnings projected to rise significantly in the medium term, I don’t see the valuation as a deal breaker.
How to buy penny stocks in the UK
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Based in London, Edward is a distinguished investment writer with an extensive client portfolio comprising a diverse array of prominent financial services firms across the globe. With over 15 years of hands-on experience in private wealth management and institutional asset management, both in the UK and Australia, he possesses a profound understanding of the finance industry.
Before establishing himself as a writer, Edward earned a Commerce degree from the prestigious University of Melbourne. Complementing his academic background, he holds the esteemed Investment Management Certificate (IMC) and is a proud holder of the Chartered Financial Analyst (CFA) qualification.
Widely recognized as a sought-after investment expert, Edward’s insightful perspectives and analyses have been featured on sites such as BlackRock, Credit Suisse, WisdomTree, Motley Fool, eToro, and CMC Markets, among others.
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