Penny shares are high-risk investments. But they can be worth including in a portfolio due to the fact that they occasionally produce enormous returns.

Here, I’m going to highlight a penny share I currently own in my Stocks and Shares ISA. Year to date, it’s up over 40%, meaning it’s outperformed many more well-known growth stocks such as Rolls-Royce and Nvidia.

Small but mighty

The stock in focus today is Calnex Solutions (LSE: CLX). This is a tiny (market-cap of £57m) Scottish company that specialises in test and measurement solutions for telecoms, cloud computing and data centres, government and defence markets.

It currently trades for 65p. Like most penny shares however, the share price can be very volatile (over the last few years it has been up and down like a yo-yo).

A pickup in performance

As for why the share price is rising at the moment, there are two main reasons, in my view. One is that after a period of operational weakness (due to soft conditions in the telecoms market), business performance is improving.

In an April trading update, the company told investors it had made good progress in the year ended 31 March, delivering double-digit revenue growth and improved profitability, while continuing to invest in its long-term strategy. For the year, revenue was up about 19% to £21.9m (FY25: £18.4m).

Management noted that gross margins had remained strong, which had contributed to an improvement in profitability for the year. It added that at the end of the year, the company had a strong balance sheet with cash of £9.3m on its books.

AI exposure

Another reason is that the company’s expanding into new markets and increasing its total addressable market. Whereas in the past it was mainly focused on telecoms, it’s now generating revenues from the data centre and defence sectors (both of which are high-growth markets).

“Diversification across the cloud computing & data centres and government & defence markets continued to gain traction in FY26 and, against a backdrop of a stable telecoms market, supports confidence in continued growth in FY27 and FY28.”

Calnex CEO Tommy Cook

Zooming in on the data centre market, Calnex recently said that its SNE network emulation product (currently progressing through a successful discovery phase) is attracting keen interest, with anticipated revenue generation in late FY2027. It also said that its Sentry product – which verifies network performance – has seen significant sales to a hyperscaler and that its next generation product offers strong forward potential across the global data centre industry.

An investment opportunity?

Is this penny share worth a closer look today? I think so, especially if it pulls back a little.

In my view, this company has significant long-term growth potential, given its exposure to the 5G, data centre, and defence markets.

Looking beyond the growth potential, I like the fact that founder Tommy Cook is the CEO as founders tend to make strategic business decisions with the long term in mind (note that he owns a lot of shares so it’s in his interest to boost performance).

Now, I need to stress that it’s a high-risk investment. This is a small company and it hasn’t grown in a straight line in recent years.

Taking a three-to-five-year view though, I see a lot of potential.