Penny stocks are often firms in distress or ones not producing any revenue let alone profits. But Made Tech Group (LSE:MTEC) is different. It’s founder-led, growing sales, and is already profitable.

Not only that, but the two City brokers following the stock rate it a Buy. And their 12-month price target, taken as an average, is 40% higher than the current share price. One broker’s target is 47% higher.

So, is this penny share worth investigating further?

What does the company do?

Made Tech is a provider of digital, data and technology services to the UK public sector and other regulated industries. Its client base spans central government departments, local councils, and other organisations.

The company helps them upgrade outdated technology, speed up digital transformation, improve cybersecurity and make better use of data and AI. Needless to say, this is all very necessary across the sprawling UK public sector today. 

Although the share price is down 62% since listing in 2021, the recent performance has been much better. It’s up 77% over the last year, giving the firm a £76m market cap.

What’s driving the share price?

Investors have warmed up to Made Tech because the business has been performing well. In the 12 months to 31 May (FY26), revenue increased 27% to £58.9m. Pre-tax profit was £2m, against a loss of £3m the year before.

During the period, the company delivered the Reception Baseline Assessment service for schools across England and contributed to the redesigned Met Office weather app. It also signed a £19m multi-year contract with the Government Digital Service.

More recently, in August, the company secured the largest contract in its history. This was with a government department and worth roughly £40m over four years.

Note that this took Made Tech’s contracted backlog to approximately £115m, providing “increased revenue visibility into FY27 and beyond“. Founder and CEO Rory MacDonald hailed this as a milestone moment in the company’s growth.

So with such progress being made, it’s not hard to see why the share price has been heading in the right direction. But what could put a spanner in the works?

Still a small fish

As mentioned, Made Tech moved into profitability last year. The adjusted EBITDA margin improved from 7.5% to 10%, and management sees more progress to come in future as operational leverage kicks in.

However, compared to other technology companies, the firm’s margins are still quite slender. It wouldn’t take much to send the firm back into the red. Perhaps there’s some operational setback or departmental budgets are squeezed.

On top of this, there’s a lot of competition in the sector. And while progressing nicely, Made Tech is still quite a small fish in a very large pond.

Worth a look?

Of course, that could turn out to be a good thing for investors, as the firm could keep taking market share to grow larger. The fact that government departments are entrusting it to work on larger programmes is a really promising sign.

With the UK public sector embarking upon a multi-year AI transformation, I think more growth is likely here. And with the stock trading at a cheap-looking 16 times forward earnings, I reckon this penny stock is worth digging into further at 51p.

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Ben McPoland has no position in any of the companies mentioned.