1 penny stock I’d buy for 2023 and hold for a decade

This under-the-radar penny stock looks like a smart buy to me. In fact, I’d hold it for a decade to try and maximise its full return potential.

| 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.

Bournemouth at night with a fireworks display from the pier

Image source: Getty Images

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.

The returns from investing in the right penny stock can be huge. Yet such stocks can also be very risky. After all, there’s normally a good reason the market values them so lowly. These companies usually have poor fundamentals and slim prospects for near-term profitability.

Still, I do reserve a small portion of my portfolio for exciting moonshots. One penny stock I own is Creo Medical Group (LSE: CREO).

Here are three reasons why I’m bullish on the shares long term.

Innovation

Creo Medical is a British company that develops and commercialises a suite of electrosurgical medical devices. These are used in the field of endoscopic surgery, which involves surgeons using a scope and a flexible tube with a camera and light at the tip.

The firm’s leading product is called Speedboat, which is a minimally invasive surgical device attached to an endoscope. This is used to cut out or vaporise cancerous and pre-cancerous lesions in the digestive tract.

Endoscopes are traditionally only used to diagnose diseases, not treat them. But Creo’s products can dissect, resect, coagulate and inject, all in a single device. They’re powered by advanced types of energy. This Croma Advanced Energy platform — as it’s known — is patented and is already being licensed out to other surgical companies.

The firm also makes money from selling the consumables necessary to continue using its core devices. This razor-and-blades business model is attractive because to me it’s underpinned by predictable, recurring revenue from consumables.

During the first half of 2022, the volume of procedures used with Speedboat internationally doubled over the equivalent period last year. Revenue for 2023 is estimated to grow 20% year on year, to around £33m.

Massive partnership

Earlier in 2022, the company signed a multi-year collaboration with robotics giant Intuitive Surgical. Under the agreement, its products are to be made compatible with Intuitive Surgical’s state-of-the-art robotics technology. A number of milestone payments to Creo Medical have been agreed, as well as royalties for products sold in the future.

This was a massive endorsement for the company’s technology. Then last month, a second robotics licensing deal was signed with Cambridge-based CMR Surgical. Both these deals bode well for future earnings.

Sad statistics

Unfortunately, it’s estimated there will be a 40% rise in new cases of bowel cancer in the next two decades. Existing surgical treatments involve long recovery times, which puts pressure on health systems such as the NHS.

Creo’s advanced energy platform and innovative surgical tools allow for much quicker recovery, reduced hospital stays, and lower recurrence rates. Its technology is a win-win situation for patients and health care providers.

With a market cap of only £72m, the stock might also be a win for patient shareholders too.

Not yet profitable

Creo Medical has only commercialised its products in the last couple of years. And its progress was slowed down during the pandemic. So it’s not a profitable business yet, which probably goes some way to explaining the stock’s 73% decline in 2022.

There’s a strong likelihood that the firm will need to raise more cash soon to fund its next stage of growth. That could send this growth stock lower, depending on the details of the capital raise. Even so, I’m still adding to my position in 2023, possibly before.

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.

Ben McPoland has positions in Creo Medical and Intuitive Surgical. The Motley Fool UK has recommended Intuitive Surgical. 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

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »

Close-up of British bank notes
Investing Articles

These 2 shares are Dividend Aristocrats. Which should I buy this March?

Our writer likes the business model of this pair of FTSE 100 Dividend Aristocrats. So why would he only consider…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

I bought 49 Unilever shares in June. Here’s what they’re worth today

Harvey Jones bought a modest amount of Unilever shares last summer hoping the stock would soon recover. He's having to…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

I reckon these shares, potentially 20% undervalued, are Warren Buffett’s type of investment

Oliver Rodzianko thinks Games Workshop is an absolutely stellar investment. As it's potentially undervalued, he reckons Warren Buffett would agree.

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Great investing habits that can boost my Stocks and Shares ISA

Forget complicated calculations and financial jargon! Our writer uses a few simple habits to build wealth inside his Stocks and…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Why has the St. James’s Place share price crashed 30%, after FY results?

The St. James's Place share price has just fallen off a cliff. What could have gone wrong in 2023 that's…

Read more »

Family in protective face masks in airport
Investing Articles

Here’s how much I’d have if I’d bought 1,000 Rolls-Royce shares 10 years ago

Rolls-Royce shares may be flying high this year but that wasn't always the case. I'm calculating how much I'd have…

Read more »