1 AIM penny stock I’d buy and hold till the 2030s!

This volatile AIM-listed penny stock remains well down from its all-time high. I’d buy shares at 27p today and hold them into the next decade.

| 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.

Female Doctor In White Coat Having Meeting With Woman Patient In Office

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Investing in penny stocks isn’t for the risk-averse. They’re often sensitive to any piece of market news and there’s low liquidity. This means they can be extremely volatile, with sudden movements one way or the other. On the other hand, finding the right penny stock can be a very rewarding activity.

Here’s why I think this small-capitalised company has enriching potential at 27p.

Volatile stock

Creo Medical (LSE: CREO) shares epitomise volatility. After going public at 77p in 2016, the stock proceeded to double within two years. Then it went up and down for three years, before plunging all the way down to 18p. Now the shares are at 27p, having rocketed 42% in the past month.

The stock lost over 80% of its value in 2022. The reason was fear about the company’s dwindling cash reserves. However, last month the firm announced that an oversubscribed fundraise had brought in £28.5m. And there’s the potential for an extra £5.2m from an open offer of stock.

Craig Gulliford, CEO of Creo, said: “This funding round will not only provide us with the working capital to accelerate the roll out of our core technology, but will also resolve the funding gap to provide us with a pathway to being cash flow breakeven and, ultimately, to profitability.”

This fresh injection of capital into the business has now removed liquidity concerns. Investors can instead focus on the market opportunity ahead, which I believe is substantial.

Cutting-edge technology

The company has developed a suite of minimally-invasive electrosurgical devices. All six of its products have been CE marked and five are also cleared for use in the US.

Its flagship product is called Speedboat. This device can be attached to an endoscope to cut out or vaporise pre-cancerous growths in the digestive tract before they spread. Endoscopes are normally used to investigate rather than perform treatments, so this innovation benefits patients and ultimately saves healthcare systems money.

Creo’s devices are powered by an advanced energy platform called CROMA. Importantly, the firm has started to licence this patented technology to other companies, including global robotics giant Intuitive Surgical. The company has already received its first income from this non-exclusive licensing deal (around £1.4m), and expects additional milestone payments, as well as growing device sales revenue.

These intellectual property deals with Intuitive is a huge endorsement of Creo’s technology, and the company expects to announce more such licensing deals in the future.

The stock

Analysts expect the firm to post £27m in sales for fiscal 2022. That’s from basically nothing in fiscal 2019, when its devices first started generating revenue. But the company is still loss-making, and the risk is that it remains so. At the very least, it will have to significantly increase sales next year to justify its current £56m market cap.

However, the stock’s price-to-sales (P/S) ratio of two doesn’t look too demanding. And with cash no longer an issue, most analysts believe the company has a clear path towards being cash generative in 2025.

Overall, I think the stock has immense long-term potential. That’s why I recently topped up my holding.

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

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »

Investing Articles

Here’s a plan to target £7,500 a month in passive income

This writer outlines a roadmap that someone could consider taking to try and aim for a substantial future passive income…

Read more »

Young female hand showing five fingers.
Investing Articles

5 FTSE 250 stocks Fools are backing for promotion to the FTSE 100 this year

Can Vistry make an imminent return from the FTSE 250? One Fool thinks so -- read on to find out…

Read more »