Penny stocks can quickly turn an ISA into a rocket ship. Equally, they can turn it into a crash site, so I certainly wouldn’t want to hold more than a small handful.

However, due to their huge growth potential, I think they can still have a place in a diversified Stocks and Shares ISA. Here are two options worth thinking about.

Hardide

Hardide (LSE:HDD) serves as a great example of what can go right. This penny share is up 1,262% over the past 12 months!

Shareholders can thank a major North American energy company that’s using Hardide to coat its engineering components to protect them from extreme wear and corrosion. Admittedly, that sounds boring, but the firm’s growth speaks for itself.

This year, revenue is expected to soar to £13.5m, up from £4.7m in FY24. By FY28, we could be looking at revenue of about £20m, with much higher profit margins to boot. The company is busy building three new coating reactors to support growth.

That said, there’s always a risk when a lot of business is coming in from a single customer. What if the orders dry up?

On the flip side, a major customer from the oil and gas industry provides strong product validation, suggesting more may come knocking. Indeed, Hardide has mentioned the Middle East, which would be another exciting development (once the conflict subsides).

It’s also eyeing up opportunities in the semiconductor industry. Given the growth potential here, I snapped up a few shares not long back. They’re trading at a reasonable forward price-to-earnings (P/E) ratio of 12.5.

As such, this surface treatment technology provider could still be a bargain, even after the almighty rally.

We are now focused on doubling revenues again from current year levels and diversifying our customer base over the next few years.
CEO Matt Hamblin.

Made Tech

Next we have Made Tech (LSE:MTEC), a technology services provider that helps the UK public sector modernise its IT. The firm works with the NHS, Ministry of Justice, HMRC, and various councils.

The stock is up 55% year to date, reflecting Made Tech’s impressive results and ability to win large contracts. In the 12 months to 31 May, revenue climbed 27% to £58.9m, ahead of expectations, while adjusted EBITDA jumped 69% to £5.9m.

The momentum has continued into this financial year. In August, the firm bagged a four-year contract worth £40m with a UK government department. This was the largest deal in its history!

Now, there’s no guarantee that contracts of this size will keep flowing the company’s way. There’s plenty of competition in the UK public sector IT and digital services market, and Made Tech is still a small player (its market cap is just £78m).

However, a forward P/E multiple of 17 isn’t expensive for an expanding firm with new product and growth opportunities opening up with AI.

The UK public sector is entering a multi-decade AI transformation, creating a substantial long-term opportunity for trusted delivery partners like Made Tech.
CEO Rory MacDonald.

Made Tech will release its audited results for FY26 on Tuesday (29 September), alongside a trading update. If investors like what they read, they might want to consider this penny stock in October.

Should you invest £5,000 in Hardide right now?

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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Hardide made the list?

Ben McPoland owns shares in Hardide.