2 Penny Stocks to Buy Before Earnings: Alfabs Australia Ltd (ASX: AAL) & Duratec Ltd (ASX: DUR)

For investors willing to take a calculated risk for higher rewards, ASX penny stocks can be a treasure trove of opportunity—especially ahead of earnings season. These small-cap companies often go unnoticed by the broader market, yet they can deliver outsized returns when strong results hit the board.

Two stocks currently catching attention are Alfabs Australia Ltd (ASX: AAL) and Duratec Ltd (ASX: DUR) — both showing solid fundamentals, expanding order books, and improving profitability. With earnings around the corner, these companies are drawing interest from investors looking to get in early on potential upside momentum.

Alfabs Australia Ltd (ASX: AAL): Accelerating Profitability and Expansion

Alfabs Australia Ltd, a diversified engineering and services group, is emerging as one of the more promising small-cap plays in the mining services and industrial equipment sector. Its recent performance highlights a company on the move — growing profits, expanding operations, and strengthening shareholder returns.

FY25 Performance Snapshot

1. EBITDA: $26.4 million — up 37.64% year-on-year
2. Net Profit After Tax (NPAT): $12.2 million
3. Dividend: Fully franked final dividend of 1.7 cents per share, up 13% from last year

These figures underscore not only robust financial management but also the company’s ability to scale efficiently even in a competitive environment.

Operational Growth and Expansion

One of Alfabs’ key strengths lies in its operational footprint. The company recently opened new workshops in Wollongong and Kurri Kurri, specializing in diesel servicing and mobile technician facilities. These expansions enhance its service capacity in underground mining, one of Australia’s most resilient industrial segments.

With the mining services industry seeing renewed investment amid strong commodity demand, Alfabs is strategically positioned to benefit. Analysts expect continued profitability momentum in FY26, supported by a strong contract pipeline and the full-year impact of these new facilities.

Dividend and Cash Strength

The dividend increase reflects solid cash flow and financial discipline—a sign that management is confident about sustained earnings growth. For a penny stock, consistent dividends are a rare but reassuring feature, making Alfabs a standout for both growth and income-focused investors.

Outlook

Looking ahead, Alfabs is set to continue its expansion into engineering services and underground mining support. With Australia’s resource sector remaining robust, the company could surprise on the upside when FY25 earnings are announced.

Duratec Ltd (ASX: DUR): Contract Strength and Financial Discipline

Duratec Ltd, a specialist in asset protection and remediation, has been quietly building momentum with strong project wins and disciplined financial performance. Operating across mining, defence, energy, and infrastructure, Duratec plays a critical role in maintaining Australia’s industrial backbone.

FY25 Guidance

• Revenue: $600–640 million (projected)
• EBITDA: $52–56 million (projected)

These numbers reflect consistent growth, particularly impressive in a sector where project delays and inflation pressures have challenged many peers.

Contract Wins and Growth Drivers

Duratec’s pipeline continues to expand, with several major contract wins driving near-term optimism:

1. A $44 million structural integrity project with Rio Tinto
2. Multiple contracts with the Department of Defence, worth nearly $10 million combined
3. Continued renewal of industrial maintenance agreements across Australia

These contracts underline Duratec’s reputation for reliability and technical expertise, ensuring recurring revenues and predictable cash flow.

Profitability and Financial Health

During the interim period, Duratec reported:

1. EBITDA growth: +12.3%
2. Net profit increase: +6.1%

This steady growth, achieved through operational efficiency and cost control, highlights management’s strong execution skills.

Duratec also maintains a solid balance sheet, with ample cash reserves and a conservative debt profile. This allows the company to pursue new project opportunities without overstretching its finances.

Dividend and Shareholder Returns

Duratec continues to reward shareholders with rising dividends — its interim dividend of 1.75 cents per share (fully franked) marked a 16.7% year-on-year increase. For a penny stock, such payout consistency is a powerful signal of confidence from management.

Outlook

As infrastructure spending and defence projects expand, Duratec’s order book and earnings visibility remain strong. Analysts see the potential for earnings upgrades if the company continues converting tenders into contracts at its current pace.

Why These Stocks Stand Out Before Earnings

Earnings season can act as a powerful catalyst for penny stocks — particularly for companies like Alfabs and Duratec that are entering results season with operational tailwinds and market optimism.

Here’s why both deserve attention:

1. Strong Sector Positioning:
   Both companies operate in high-demand, resilient industries — mining, infrastructure, and defence — sectors that continue to attract strong government and corporate investment.
2. Profitability and Cash Flow Growth:
   Alfabs’ 37% EBITDA growth and Duratec’s steady margin expansion show real business progress, not just speculative hype.
3. Institutional and Insider Confidence:
   Both firms have attracted increasing institutional interest, a key signal that professional investors see value ahead of earnings. Insider buying activity in both stocks has further reinforced this sentiment.
4. Dividend Growth and Financial Discipline:
   Despite being penny stocks, both companies pay fully franked dividends and demonstrate capital discipline—traits not commonly found in small caps.
5. Potential Earnings Surprises:
   Given their growth trajectories, both Alfabs and Duratec could beat market expectations, leading to short-term share price momentum once earnings are announced.

Conclusion

Alfabs Australia (AAL) and Duratec (DUR) are two small but mighty players that embody what savvy investors look for before earnings season—rising profits, solid contracts, and credible management teams.

Alfabs is benefitting from operational expansion and a sharp profitability lift, while Duratec continues to execute strongly on high-value contracts in mining and defence. Both are showing growing dividends, sustainable cash flow, and potential for earnings upgrades in the coming quarters.

For investors willing to embrace a bit of volatility in exchange for early-stage growth and strong upside potential, these two stocks deserve a close watch as FY25 results approach.

In short, Alfabs brings momentum, and Duratec brings stability—a powerful one-two combination for those looking to uncover value in the ASX penny stock space before earnings season kicks off.

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