Why I think small-cap growth stock Versarien could still help you achieve financial independence

Hot stock Versarien plc (LON:VRS) rises on news of a new order. Paul Summers is holding tight to his shares.

| 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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Thanks to the higher chance of failure and greater share price volatility, owning slices of early-stage companies certainly isn’t for everyone. That said, investing in a market minnow can sometimes be the source of massive profits if it manages to deliver on its potential.

One company that has served early investors — including myself — particularly well over the last year or so has been advanced materials engineer Versarien (LSE: VRS).

Based on today’s interim report, I’m in no hurry to sell just yet.

Collaboration crazy

Befitting its high-growth credentials and need for ongoing investment, Versarien reported a pre-tax loss of £0.7m over the six months to the end of September, despite revenue increasing 19% to £5.22m. Nevertheless, it’s the operational progress made by the company that’s of more interest to the market right now. 

Continuing a trend that began roughly one year ago, Versarien inked nine new collaboration agreements over the reporting period, as well as capturing the services of Matt Walker and Pete Jay from the Department of International Trade to spearhead the company’s international ambitions.

Highlights since September include the purchase of a controlling stake in Spanish company Gnanomat and the Memorandum of Understanding signings with three Chinese firms — one of which relates to plans to build a manufacturing centre in Shandong Province.

Reflecting on the latter, CEO Neill Ricketts stated that the company’s expansion into China has “attracted a large number of suitors” and that Versarien intended to replicate the process “in other Asian territories“.  These developments, when combined with the £5.15m raised back in September, leaves the company “extremely well positioned for the future“, Mr Ricketts added. 

And Versarien is very much about the future. To be clear, a substantial proportion of the company’s current valuation is based on the potential for graphene to revolutionise our world. As such, it’s therefore absolutely vital that at least some of the firm’s many ongoing collaborations lead to substantial orders to justify the already-lofty market capitalisation of £175m. On this front, things are looking positive. 

Last month, it received an order for 1kg of Nanene — its patented graphene nano platelets — from a major global airline with the intention of using the product in fire-retardant aircraft interior parts. Encouragingly, more orders are “anticipated“.

But there’s more. Today, Versarien also announced that US engineering giant AECOM had placed an order for 50kg of graphene-enhanced polymer material with another 200kg order likely in early January. Should final testing be successful, the next bit of news relating to this project could be very significant indeed. 

Bottom line

Clearly, there’s still a long way to go for the Cheltenham-based business to silence its doubters. Nevertheless, if you believe (as I do) that the mass-market adoption of graphene is only a matter of time, then it is arguably the best horse to back. The fact that its stock still trading almost 40% below the high of 187p achieved almost three months ago suggests that now might be as good a time as any to begin building a position.

If — and it is a sizeable ‘if’ — Versarien is able to capitalise on its pole position in the commercialisation of the wonder material, then I maintain it could help some investors reach financial independence far earlier than they ever imagined.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers owns shares in Versarien. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

A brilliantly reliable FTSE 100 share I plan to never sell!

This FTSE-quoted share has raised dividends for more than 30 years on the spin! Here's why I plan to hold…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

This 7.7% yielding FTSE 250 stock is up 24% in a year! Have I missed the boat?

When a stock surges, sometimes it can be too late to buy shares and capitalise. Is that the case with…

Read more »

Investing Articles

£13,200 invested in this defensive stock bags me £1K of passive income!

Building a passive income stream is possible and this Fool breaks down one investment in a single stock that could…

Read more »

Investing Articles

I think the Rolls-Royce dividend is coming back – but when?

The Rolls-Royce dividend disappeared in 2020 and has not come back. But with the company performance improving, might it reappear?

Read more »

British Pennies on a Pound Note
Investing Articles

Should I snap up this penny share in March?

Our writer is considering penny shares to buy for his portfolio next month. Does this mining company merit a place…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Stock market bubble – or start of a bull run?

Christopher Ruane considers whether the surging NVIDIA share price could be symptomatic of a wider stock market bubble forming.

Read more »

Investing Articles

Buying 8,254 Aviva shares in an empty ISA would give me a £1,370 income in year one

Harvey Jones is tempted to add Aviva shares to his Stocks and Shares ISA this year. Today’s 7.37% yield isn't…

Read more »

Investing Articles

Is the tide turning for bank shares?

Bank shares are trading on stubbornly cheap-looking valuations yet business performance in the sector is broadly robust. Should our writer…

Read more »