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.
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.
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.
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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.