After years of stock market trading, I’ve learned to view outsized rallies with a healthy dollop of skepticism. The skyrocketing penny stock Hardide (LSE:HDD) is a good example.

Over the past year, the shares have soared from just 7.5p (August 2025) to 91.5p today — a gain of 1,120%. Had you dumped £1,000 into the stock back then, you’d have over £12,200 today!

That dwarfs the gains made by top UK and US blue-chips such as Glencore, Intel and Micron over the same period: about 90%, 333% and 686% respectively.

The contrast highlights the extraordinary growth potential of penny shares, particularly those starting from a tiny valuation and a distressed base. But what prompted the growth, and is it sustainable?

What Hardide does

Hardide develops tungsten-carbide and tungsten-metal-matrix composite coatings. These specialist treatments are designed to improve component life and performance in demanding markets including energy, aerospace, flow control, power generation and precision engineering.

Those are high-demand industries, but it’s still a very small business, with about 30 employees – far from becoming an established industrial giant.

Still, the numbers behind its recovery are real. FY2025 revenue increased 27.5% year-on-year to £6.03m. The company moved from a £1.19m operating loss in FY2024 to a £0.26m operating profit, while net income improved from a £1.32m loss to £0.178m profit.

Critically, operating cash flow turned positive, reaching £0.66m. In its latest interim results, second-quarter FY2026 revenue was £4.79m, operating profit reached £1.28m, and operating cash flow was £0.98m.

An even more recent trading update, published on 22 July, revenue for the nine months to 30 June was £8.9m. Those figures help explain the re-rating, but they also show why quarterly timing matters. 

The valuation question

At 91.5p, Hardide has a market-cap of about £67m and a quoted price-to-earnings (P/E) ratio of 50. I noted some independent analysis suggested the stock could have a forward P/E of about 15, but that’s hard to verify for a micro-cap share.

Even if forecasts imply that multiple, investors must ask whether the earnings growth will arrive. A valuation is only attractive when the underlying forecast is credible, and micro-cap forecasts can change rapidly when one contract moves.

So the risks are substantial:

• Hardide’s an AIM-listed, micro-cap and relatively illiquid.
• It has a long history of losses, including £1.118m in FY2023.
• There’s no established record of sustained profitability.
• FY2025 year-end cash was £0.8m against total debt of over £4m.
• Growth may require more investment or shareholder funding.

My verdict

Clearly, Hardide’s in the midst of a spectacular turnaround. Revenue growth, improved margins and recent profits suggest it has genuine potential. But after a 1,120% rally, how much of that recovery is already priced in? It’s unlikely that would happen again, without much stronger earnings and cash generation.

As is common with penny stocks, this is a high-risk/high-reward option. It could grow to become the next FTSE 100 gem but, right now, it looks expensive. I’d wait for it to stabilise at a more sensible level before considering.

The next results should reveal whether this is the beginning of a durable growth story – or simply an illiquid, speculative rally running on hype.

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

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Mark Hartley does not hold any positions in the companies mentioned.