Historically, Penny stocks tend to be more volatile than the medium-cap or blue chip stocks. So, it's not unusual for penny stocks to go through double-digit declines or even major crashes.
One such stock which has gone through a lot this year is Severfield (SFR). This penny stock has lost 60% of its value since November 2024. And this year alone, the stock is down by 40% which shows there is something seriously wrong with them.
According to experts, the company is facing financial, operational, and other challenges. This has led to profit warnings on multiple occasions.
For starters, Severfield (SFR) faced adverse market conditions. As a result, the contract was delayed, which ultimately affected the revenue.
The company also faced the issue of competitive pricing, which ultimately affected its bottom line. As a result, the pre-tax profits have been down by almost 50%.
The end result? Severfield (SFR) has moved into unprofitability and downgraded its guidance multiple times. All of this has spooked the investors and this can be seen with the -60% decline in the stock prices.
However, it doesn't mean everything is going bad for the Severfield (SFR). Data shows an uptick in the order book, which means they might be able to make a comeback.
Also, the demand from the data centres has gone up, which is a good thing for the firm's steelworks business. Also, the company is in a good position to stage a recovery in the coming years.
So, should you consider the Severfield (SFR) penny stock? As long as the company can stabilize the business and a rebound is seen in the steel demand, then yes.
But, if the market conditions don't improve, the risks of buying Severfield (SFR) will be too much to enter even at a -60%. But over all, Severfield (SFR) represents the classic high risk and high reward opportunity for investors.