Why Versarien plc shares are trading 10% higher

Versarien plc (LON: VRS) is rising today but is it time to buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shares in Versarien (LSE: VRS) are rising again this morning, extending this year’s gains to 128% as investors buy into the company’s growth story.

Versarien is an advanced materials company. The firm acquired an 85% stake in Cambridge Graphene in January and raised £1.5m last month to help scale up the business.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

It seems this investment is already paying off. At the end of March, the group announced that the Cambridge Graphene team, supplemented by recently added personnel, is already producing graphene in sample quantities for customers using new equipment purchased with the fundraising proceeds. Further, Versarien is undertaking further testing and commissioning of capital equipment to scale up its graphene manufacturing capability.

A huge new market 

The graphene business has attracted plenty of criticism over the past few years. The material is believed to be 200 times stronger than steel with numerous potential applications such as turning seawater into freshwater, improving the efficiency of solar cells and helping toughen up phone screens.

However, this wonder material is proving hard to commercialise, and so far, most investors who have tried to profit from the graphene boom have been left with nothing but losses.

The question is, could Versarien buck this trend? Well, it seems the group’s management is doing everything possible to make sure that this is the case. At the beginning of February, the firm signed heads of terms for a distribution agreement with Lansdowne Chemicals for its recently-launched graphene brand Nanene. This partnership came nearly two months after what Versarien’s management describes as “one of the first significant orders placed in the UK for the supply of high-quality graphene,” which was announced at the end of November.

Making headway

So it’s clear Versarien is making progress, but the company is still in its early stages of growth. Luckily, the firm’s legacy divisions are generating sales, which means the group has an existing base to grow from.

Last year the legacy divisions reported revenue of £4.4m and this year, management expects revenue to come in slightly below expectations. But compared to the graphene opportunity management is targeting, Versarien’s legacy income is relatively insignificant.

At the end of 2016, the graphene market had a total value of $23.7m, but this market is expected to grow at an annual compound rate of 36.7% through to 2025, giving a final size of $643m. If the market continues to expand at this rate, by 2035 it could be worth a total of $8.4bn. 

With such an enormous addressable market emerging, it’s clear how much potential Versarien has. That said, the company does come with its own set of risks. Like all early stage businesses, there’s the risk that management won’t be able to commercialise its graphene product entirely and the company may run out of cash. 

Overall, after recent developments, the outlook might look as if it’s improving, but the company still has a huge amount of work to do before it can be considered to be an attractive growth stock. 

More on Investing Articles

Portrait of construction engineers working on building site together
Investing Articles

Is this FTSE 100 stock the best housebuilder to invest in?

One FTSE 100 housebuilding stock has outperformed all of its industry peers by a big margin this year. Should I…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

2 cheap dividend growth stocks I’d buy as the economy sinks

I'm searching for the best bargains to buy following recent market volatility. Here are two top dividend growth stocks I…

Read more »

estate agent welcoming a couple to house viewing
Investing Articles

Here’s 1 FTSE stock primed to benefit from the current housing market!

With the current housing market as it is, Jabran Khan explores a related FTSE stock that could provide stable and…

Read more »

Portrait of construction engineers working on building site together
Investing Articles

Here’s why this AIM-listed stock could be one of the best shares to buy!

This Fool is looking for the best shares to buy. Despite macroeconomic issues, this stock could be a great long-term…

Read more »

Elderly father and adult son work in the garden
Investing Articles

This penny stock could be set to soar! Should I buy shares?

This Fool looks closely at a penny stock operating in an exciting growth market that could see its shares rise…

Read more »

Illustration of bull and bear
Investing Articles

The next stock market recovery looks imminent

As the stock market bear gives way to the bull, some stocks are already turning up and I'm ready to…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

2 dividend shares to protect me from soaring inflation

Dividend shares can be an excellent way to keep up with inflation. Our writer explores several options to protect his…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Is it time to buy Unilever stock?

Unilever stock has underperformed in the last five years. But with its portfolio of powerful brands, should I buy now…

Read more »