A company insider just bought 2,916,666 shares of this penny stock!

This penny stock in my ISA has lost over half its value this year. But with directors buying shares recently, I’m wondering if I should do the same.

| 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.

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.

Creo Medical (LSE: CREO) has been a disappointing penny stock recently. It’s slumped 57% in 2024 and now trades for 19p. For context, it was going for 215p back in 2021.

One key issue for the medical device company lately has been a need to shore up its balance sheet to fund its growth opportunities. It recently raised £12m through a share placement priced at 24p.

I started buying this stock at around 42p a while back, then doubled down at a price of 28p in the summer. So I’m well down by now.

Should you invest £1,000 in The Prs Reit Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The Prs Reit Plc made the list?

See the 6 stocks

However, I note insiders have been taking up the offer of new shares. I didn’t join them. But should I buy more at 19p? Here are my thoughts.

Created with Highcharts 11.4.3Creo Medical Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL27 Oct 201927 Oct 2024Zoom ▾Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '242020202020212021202220222023202320242024www.fool.co.uk

Skin in the game

On 21 October, Creo’s non-executive chairman Kevin Crofton acquired 2,916,666 shares at a price of 24p each. This transaction totalled approximately £700k.

At the same time, chief financial officer Richard Rees snapped up nearly £50k worth of shares.

It’s always good to see insiders purchasing shares. As Wall Street legend Peter Lynch once pointed out: “Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise.”

Of course, that doesn’t mean the share price will rise. It’s on a worrying downwards trajectory.

What is Creo anyway?

For those unfamiliar, the firm develops minimally invasive electrosurgical devices. Its flagship Speedboat product, powered by proprietary energy technology, combines radiofrequency cutting with microwave coagulation.

Put simply, this helps surgeons remove cancer and pre-cancer more effectively from the lower gastro-intestinal tract before it spreads. The firm’s MicroBlate tool is focused on treatments for various cancers.

According to data collected from over 130 patients, Creo’s technology saved East Kent Hospitals University NHS Trust over £5,000 per procedure undertaken. And it provided a 91% reduction in accommodation costs per patient.

So there is great growth potential for the company as hospitals around the world (hopefully) adopt these cutting-edge devices. But it won’t happen overnight as doctors need to be trained to use them.

Growing pains

The firm recently released a disappointing set of interim results. Revenue of £15.2m was down from £15.7m the year before, meaning zero growth. And the underlying EBITDA loss increased to £10.5m, from a loss of £9.2m in H1 2023.

Creo initially projected reaching EBITDA breakeven by 2026, but that target has now been pushed back to 2028. So the company is to remain loss-making for longer than originally planned, which is a key risk here.

On the positive side, the company should be well-capitalised after selling a 51% stake in its European business. Combined with the share placement, this will give the firm around £40m.

Management says this will make Creo “sufficiently well-funded to reach profitability“.

Will I buy more shares?

The company has exciting growth potential. Its MicroBlate technology is currently in trials with Intuitive Surgical‘s Ion robot for lung cancer treatment. This combination would enable clinicians to diagnose and treat tumours in the same procedure.

However, I found the sudden lack of revenue growth in H1 a bit worrying. Consumable sales fell by 6%. Until I’m more confident in the growth trajectory again, I’m not adding to my holding, even at 19p.

AI Revolution Awaits: Uncover Top Stock Picks for Massive Potential Gains!

Buckle up because we're about to dive headfirst into the electrifying world of AI.

Imagine this: you make a single savvy investment in some cutting-edge technology, then kick back and watch as it revolutionises entire industries and potentially even lines your pockets.

If the mere thought of riding this AI wave excites you and the prospect of massive potential returns gets your pulse racing, then you’ve got to check out this Motley Fool Share Advisor report – 'AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!

And here’s the kicker – we’re giving you an exclusive peek at ONE of these top AI stock picks, absolutely free! How’s that for a bit of brilliance?

Get your free AI stock pick

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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

Tesla shares plummet 50% in 4 months! Is it one of the best stocks to buy now?

Weaker-than-expected vehicle deliveries have continued Tesla's freefall, but is this volatility turning it into one of the best stocks to…

Read more »

artificial intelligence investing algorithms
Investing Articles

Just opened a Stocks and Shares ISA? Here are 10 stocks to consider buying, according to AI

With the start of a new tax year, Zaven Boyrazian uses ChatGPT to build a Stocks and Shares ISA starter…

Read more »

Investing Articles

I asked ChatGPT for the best stocks to earn a second income and it recommended…

ChatGPT's recommended these four FTSE 100 titans as the best stocks to buy for a second income, but are they…

Read more »

Middle-aged black male working at home desk
Investing Articles

I’m planning to keep investing with my Stocks & Shares ISA! Here’s why

Royston Wild explains why he plans to keep building his Stocks and Shares ISA despite current turmoil on the stock…

Read more »

Investing Articles

These FTSE 100 dividend stocks have 9% yields!

These are the three highest-yielding dividend stocks in the FTSE 100, offering near-double-digit payouts. Are these screaming bargains?

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Is Warren Buffett getting ready for a stock market crash?

Berkshire Hathaway has a record $344bn of cash sitting in the bank right now, signalling that Warren Buffett could be…

Read more »

Investing Articles

Want a comfortable retirement? Here’s how big your SIPP needs to be

Investors need to earn at least £43,100 during retirement to live comfortably. Zaven Boyrazian explains how to grow a SIPP…

Read more »

Investing Articles

How much passive income can an investor get each year from a new £20,000 ISA?

Our writer shows how a £20k investment in an Stocks and Shares ISA could lead to an annual passive income…

Read more »