With its share price close to 39p (24 Could) Gaming Realms (LSE: GMR) has a market capitalisation of round £115m – simply above the edge of £100m for penny shares.

Nonetheless, for adventurous traders with a better threat urge for food, the agency’s progress estimates are price contemplating.

Metropolis analysts have pencilled in a surge in earnings of simply over 24% for 2024 and greater than 32% for 2025.

An optimistic outlook

Accelerating earnings like which are uncommon. Learn most how-to books centered on progress investing and that’s what many beforehand profitable traders have looked for – earnings getting larger by ever-increasing percentages.

Very often we see the figures the opposite means round with the largest share enhance within the nearest forward-looking interval after which a decline within the percentages.

No enterprise can hold up earnings acceleration indefinitely. However when it’s occurring, we typically see the largest share price positive factors too.

The enterprise develops, licenses and distributes mobile-focused actual cash and social gaming content material. It has operations within the UK, US, Canada and Malta.

In April’s full-year outcomes report, the group posted some spectacular numbers and delivered an optimistic outlook assertion. Chief government Mark Segal stated the corporate is seeing “growing demand” for its Slingo portfolio within the worldwide igaming markets.

Progress contains licensing video games into 20 regulated markets and launching with 44 companions in 2023. The corporate has 75 reside video games, Segal stated,“which demonstrates the scale of our content licensing business”.

Again then, the corporate had seen a “promising” begin to 2024, with 14 new companions secured already, and new Slingo video games “driving new players to Slingo”.

With such momentum, Segal stated the administrators are “excited” to proceed delivering additional recreation launches, associate offers, and an increasing world footprint. For instance, there are deliberate launches for West Virginia and Greece.

From zero to hero

The enterprise is performing effectively and that displays in latest share price progress:

Nonetheless, in 2019 and 2020, the enterprise was loss-making, suggesting the presence of cyclicality within the business.

There’s threat in that state of affairs for shareholders. On high of that, it’s attainable for the corporate’s providing to fall out of trend with avid gamers. So progress doubtless is determined by fixed product launching to maintain the punters . That strikes me as a state of affairs during which it could be simple for the enterprise to take a mis-step – maybe with dire monetary and buying and selling penalties.

As if that wasn’t sufficient threat, the actual fact Gaming Realms is a small-cap enterprise means a probable additional layer of volatility for shareholders.

In the meantime, the forward-looking earnings a number of for 2025 is operating round 11.5 when set towards analysts estimates. That doesn’t strike me as being an extreme valuation given the expansion anticipated. In truth, the corporate has a price-to-earnings progress ratio (PEG) of about 0.6, the place lower than one is usually thought of to be good worth.

This isn’t one for widows and orphans, and there are completely no ensures of a profitable funding final result. However, I’d take into account it for a risk-adjusted place (learn smaller) inside a diversified portfolio of shares and shares.