Investing in penny stocks might carry an element of risk, and therefore, it is not for every investor. However, occasionally, we come across a gem that offers compelling investment potential.
One such share currently catching my eye is Lindsay Australia (ASX: LAU), trading near its 52-week low of 82 cents.
Here's why I believe this ASX penny stock is a bargain and worth your consideration today.
Perishable goods logistics company
Lindsay Australia operates in the logistics and rural services sectors, primarily transporting and distributing perishable goods.
The company's operations include road transport, logistics services, and rural supply chains, making it a critical player in Australia's agricultural supply chain.
Two brothers, Tom and the late Peter Lindsay, founded Lindsay Brothers in 1953, which later became Lindsay Australia. The company was one of the first transporters to use refrigerated trailers in Australia. From there, it grew to have 19 branches, a fleet of over 1,000 vehicles, and 1,100 employees today.
While the industry remains competitive, Lindsay Australia has benefitted from industry consolidation, including Scott's Refrigerated's bankruptcy in 2023.
Guidance downgrade due to wet weather
While Lindsay Australia had a fantastic year in FY23, with its underlying EBITDA rising 50.2% to $90.3 million, FY24 hasn't been too great for the company.
In May 2024, the company had to downgrade its earnings outlook due to persistent wet weather, as my colleague Mitchell highlighted. In this update, Lindsay Australia cut its underlying EBITDA guidance to between $88 million and $94 million, implying almost no growth over FY23.
The company said the profit guidance downgrade was due to the significant and persistent rainfall that affected horticultural output in 2H FY24 and disruptions to its rail operations in March and April.
Attractive valuations
According to S&P Capital IQ, Lindsay Australia shares are currently valued at 7.5 times the estimated earnings for FY25. I find this valuation attractive because the company's earnings per share (EPS) has increased from around 3 cents in FY19 to 11 cents in FY23.
Lindsay Australia shares offer a dividend yield of 6.4% on its dividend payments in the last 12 months.
This might be an excellent opportunity to buy this small but well-run company at a bargain price.
