Looking for UK shares to buy? This 19p small-cap down 5% today may be worth considering

For investors searching for shares to buy in February, this small UK firm might be worth considering for inclusion in a diversified portfolio.

| 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.

Elevated view over city of London skyline

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.

Clinical trials firm hVIVO (LSE: HVO) delivered a trading update today (29 January). This is a stock that I own, having built up a position over the past couple of years. However, while I still view it as one of the more promising small-cap shares to consider buying, it’s proving far more volatile than I anticipated.

To give a flavour, the share price today has dropped 5% to 19p, as I write. However, in the two weeks prior, it had surged nearly 30%. Over five years, it’s up 252%, but down 36% since mid-November. Did I mention that it’s volatile?!

Looking through the update though, I think there are a couple of concerns as well as long-term potential.

Should you invest £1,000 in Hvivo 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 Hvivo Plc made the list?

See the 6 stocks

Created with Highcharts 11.4.3hVIVO Plc PriceZoom1M3M6MYTD1Y5Y10YALL29 Jan 202029 Jan 2025Zoom ▾Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '24Jul '24Jan '2520212021202220222023202320242024www.fool.co.uk

What happened?

For those unfamiliar, hVIVO is a contract research organisation (CRO) that specialises in human challenge trials (HCTs). These involve recruiting healthy volunteers — signed up through its own FluCamp recruitment platform — and exposing some of them to pathogens to test vaccines and therapeutics.

Today, the company actually delivered two announcements. First, there was the trading update for 2024, which showed 12% year-on-year revenue growth (£62.7m) and a strong EBITDA margin of approximately 26% (up from 23.3% in 2023). It ended the year with £44.2m in cash, up from £37m the year before.

Operationally, hVIVO made solid progress, opening the world’s largest commercial HCT unit. This 50-bedroom facility has also enabled the firm to diversify its offerings to include laboratory services for external clients. Earlier this month, it inked its largest standalone lab contract signed to date (£2.7m).

The second announcement offered guidance and related to the acquisition of a pair of clinical research units from a CRO in Germany. The company said this deal “further diversifies hVIVO’s services to include in-patient Phase I and Phase II trials across a broader range of therapeutic areas“.

The acquisition cost €10m, funded entirely from hVIVO’s existing cash resources. However, while the units recorded unaudited revenue of nearly €20m last year, they also reported an adjusted EBITDA loss of €1.8m.

Why is the stock down?

So, the firm is using cash to buy loss-making businesses abroad. Moreover, it plans to spend another €2.5m on integration costs in 2025. Consequently, management has warned that this will impact EBITDA margins in the short term, guiding for mid-to-high teens (significantly less than last year’s 26%).

However, it also expects the acquisition to contribute positively to earnings by 2026. And it gives hVIVO a “significant footprint” in Europe while offering “considerable cross-selling opportunities” due to a broader client base.

Looking forward, it expects revenue of £73m this year, including this deal. If we assume similar revenue at the acquired business (around £16m), then this suggests core revenue will be flat or declining, hinting at weak organic growth. That’s not ideal.

Then again, the firm has previously stated that it expects acquisitions like this to help get it to £100m in revenue by 2028.

My view

Stepping back, I think the market reaction today is understandable. However, the stock at 19p may still be worth considering for patient investors.

Given this is a business with a modest £129m market cap though, I’m keeping my holding small relative to my overall portfolio. That way, I can benefit if it goes up while minimising damage if it doesn’t.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in Hvivo 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 Hvivo Plc made the list?

See the 6 stocks

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 hVIVO Plc. 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

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

Down 65% from its highs, this FTSE 250 stock is one to consider buying low

Shares in a strong FTSE 250 company going through a cyclical downturn have caught Stephen Wright’s attention as a potential…

Read more »

Investing Articles

£20,000 invested in a Stocks and Shares ISA 5 years ago is now worth…

Stocks and Shares ISA investors have reaped enormous returns since the pandemic, but how much money have they actually made?…

Read more »

Investing Articles

Investing £100 a month for 10 years could generate a second income of…

Even small investors can unlock a large second income from the stock market. Zaven Boyrazian demonstrates how much wealth just…

Read more »

Investing Articles

Are these the best US stocks to consider buying right now?

Some of the best stocks to buy could be those falling the most. Zaven Boyrazian explores the worst-performing US shares…

Read more »