I think this is one of the best penny stocks to buy for 2022

Supported by today’s full-year report, tech company Seeing Machines Limited (LON:SEE) is this Fool’s favourite penny stock to buy at the moment.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

British Pennies on a Pound Note

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares trading for under a pound grab investors’ attention and it’s not hard to see why. Pick right and the returns could be life-changing. I’m increasingly confident this could be the case with AIM-listed Seeing Machines (LSE: SEE). In fact, I think it could be one of the best penny stocks for me to buy for 2022.

Life-saving tech

SEE may not be familiar to a lot of readers so let’s have a quick recap. The Canberra-based, London-listed company is a specialist in eye-tracking. It creates tech for monitoring drivers’ level of alertness with the aim of reducing traffic-related accidents. The business has been around for over 20 years but it’s only now, thanks to new legislation and higher-spec vehicles, that the true opportunity is becoming apparent. This is, to some extent, borne out by today’s full-year numbers.

Revenues rise

This morning, Seeing Machines revealed an 18% rise in revenue to A$47.2m in the year to the end of June. The vast majority of this came from the company’s Aftermarket division where its Guardian tech is retrospectively fitted to fleets. The A$35.1m generated here was up 30% from last year.

All told, almost 32,000 vehicles had been fitted with Guardian by the end of June. And if the recent agreement with Royal Dutch Shell is anything to go by, I can see this number rising substantially in the years ahead.

Arguably the most important development over the last year, however, has been the start of OEM royalty licence revenue as cars begin to be fitted with its driver monitoring system (DMS) software. As things stand, nine models (roughly 120,000 cars) have this installed, including the new Mercedes Benz S-Class. It’s this part of the business that I think will eventually drive the share price a lot higher.

Can anything hold this penny stock back?

Absolutely. Even if it manages to avoid all general obstacles in its path (Covid-19, supply chain issues), progress won’t come cheap. Only yesterday, the company announced that it had raised US$41m to help it capture as big a share of the “rapidly expanding” driver monitoring system (DMS) market as possible. Such a move dilutes existing shareholders. It might not be the last time either.

Potential buyers like me also need to be comfortable with a volatile share price. A rise of almost 190% over the last five years masks the roller-coaster journey in the interim. The shares rose from below 3p in 2017 to 13p+ back in 2018. They then sank below 2p in March 2020 before recovering to just shy of 12p today. To be clear, an investment here is not for the faint of heart. 

Happy to hold

I’ve taken reasonable steps to avoid getting too dependent on Seeing Machines for growing my wealth. This includes being invested in more established businesses in a variety of industries and owning a number of quality-focused funds. To be clear, I’m not betting the farm on it. I never will. 

Notwithstanding this, the prospect of it revealing the full identities of its latest OEM customers in the months ahead could easily move its shares into a higher gear. And should the company succeed in capturing even a modest proportion of the opportunities in other sectors such as aviation, I think this could be one of the best penny stocks for me to buy more of for 2022.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in Seeing Machines. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »