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One penny stock that’s hot right now is GSTechnologies (LSE: GST). Over the last three months, it has risen about 400%, turning a £2k investment into around £10k.
It still only trades at 3.3p, though. With that in mind, could the stock generate big gains for investors from here?
What’s this company all about?
Before I analyse the numbers here, let’s take a look at what this under-the-radar company does.
GSTechnologies is an Australian financial technology (FinTech) company that’s engaged in a range of activities including blockchain financial services, foreign exchange (FX) solutions, and crypto-asset exchange services. Its brand include:
- GSMoney – a blockchain payments platform
- angrafx – an FX platform
- GS20 – a crypto-asset exchange
- Angra Global – a digital banking platform that offers e-wallets
- SEMNet – a cybersecurity consulting firm in Singapore
It’s worth noting that on 2 January, the company announced that it had completed the acquisition of Cake Pte Ltd and Cake DeFi UAB (combined, known as ‘CAKE’). CAKE offers a crypto-asset platform that currently has about 70,000 registered users.
At its current share price of 3.3p, GSTechnologies has a market cap of just £65m. So, it’s fair to say it’s a very small (micro-cap) company.
Business momentum
Now, the group appears to have some momentum right now. For the six-month period ended 30 September 2024, revenue grew nearly ninefold to $2.23m, which is impressive.
Meanwhile, losses narrowed significantly. For the period, net loss came in at $69,000 versus a net loss of $737,000 a year earlier.
A risky stock
However, I see this stock as very risky.
In the past, revenues have been volatile as the table below shows.
| FY2019 | FY2020 | FY2021 | FY2022 | FY2023 | FY2024 | |
| Revenue ($m) | 6.69 | 4.55 | 3.41 | 0.05 | 0.44 | 1.55 |
And there are no profits here, despite the fact that the company has been in business for over a decade now.
Additionally, the company’s cash balance is relatively low. At 30 September 2024, cash stood at less than $3m.
Given this low cash balance (and the lack of profits), the company may need to raise capital from investors at some stage in the future. It did this in April last year (raising £1.25m through a placing at a price of 1.05p).
The company has said that it will only undertake further fundraising activities if the board believes additional capital is required to achieve the company’s strategic goals. However, if it was to raise capital again, it could send the share price down.
One other thing worth highlighting with this penny stock is that its share price is very volatile. In the past, it has shot up by several hundred percent on a few occasions, only to come crashing back down shortly after.
Better growth shares to consider buying?
Looking at the company’s financials, it’s hard to know if this stock will continue to generate gains for investors. It may do, but it could also potentially come crashing down after its recent spike.
Given the high level of uncertainty, I think there are safer growth shares to consider buying today. Why take the risk here when there are so many brilliant growth companies with consistent revenue growth and high levels of profitability?
