What’s behind these skyrocketing returns? And is this business one of the best penny stocks to buy now? Let’s explore.

Opportunities in kidney disease

The world of healthcare diagnostics is vast and highly specialised. But in the case of Renalytix, the group is focused squarely on just one aspect – kidney disease. Using its KidneyIntelX AI-powered platform, clinical teams can catch early signs of kidney disease, resulting in better outcomes for patients.

The firm still has a long way to go before turning a profit. But unlike many penny stocks, Renalytix is already generating revenue from its technology. Considering kidney disease affects more people than cancer worldwide, the long-term potential is understandably exciting. And it seems the latest round of explosive share price growth is seen as further proof of this.

Earlier this week, the company received an unsolicited takeover bid. Another undisclosed diagnostics enterprise has taken an interest in Renalytix’s technology and submitted an offer to acquire the entire business. In response, management has launched a formal sale process, inviting other companies to make an offer.

The likely goal is to bring in other interested parties, triggering a bidding war that will drive the acquisition price higher, resulting in more money for shareholders. With that in mind, seeing the penny stock explode on this announcement isn’t a massive surprise. But is it too late to buy?

Investing versus speculation

Typically, when a company announces it’s entertaining an acquisition offer, the share price will jump to a point that’s near the offer price. But in the case of Renalytix, the offer is currently unknown. As such, it’s impossible to know whether the buyout price will be above or below the current market capitalisation of the company.

Yet if a bidding war were to commence, then this penny stock could continue to surge even higher. In this scenario, snapping up some shares today could prove to be a lucrative decision.

However, it’s important to realise that making such an investment right now is akin to pure speculation. After all, there’s no guarantee other companies will come in to make an offer. At the same time, the original offer isn’t set in stone and may not necessarily materialise.

But what if investors want to gain exposure to the kidney diagnostics market through this business? If an investment thesis is based on the underlying company rather than the potential for an acquisition, then some caution may be necessary, in my opinion.

Renalytix’s technology seems to be making waves. That’s an encouraging sight for any business. However, with the penny stock priced as if an acquisition is guaranteed, the valuation and fundamentals are currently out of whack.

Analyst forecasts for its 2024 fiscal year ending in June predict that sales will reach $6.15m (£4.85m). That puts the forward price-to-sales ratio at around 10 times. Needless to say, that’s not cheap, especially for a business that still has a lot to prove.

The post Is Renalytix the best penny stock to buy today? appeared first on The Motley Fool UK.

But from market close on 8 February, to the time of writing on 13 February, the price has soared by nearly 500% on the back of progress with US Medicare approval.

Kidney diagnostics

Renalytix is in the business of kidney disease diagnosis. Its flagship is called KidneyIntelX, which has shown promising results so far.

But there’s been no profit as yet. And until there is, we don’t know if the technology will attract widespread uptake.

As the firm said in a statement about risk: “KidneyIntelX and kidneyintelX.dkd are based on novel artificial intelligence technologies that are rapidly evolving and potential acceptance, utility and clinical practice remains uncertain“.

Hmmm, did they mention artificial intelligence (AI) there? Maybe I can see a reason for the huge share price spike in 2021.

Growth boom

AI is exciting. But it’s also been one of the biggest marketing buzzphrases of the past few years. Couple AI with a biotech growth stock, and I think that was a recipe for boom and bust.

But now that’s in the past, and we might be looking at a new sustainable run. It often takes a second wind for a new growth stock to really settle down to long-term growth.

So what does Renalytix look like now as an investment?

The books

Net sales are forecast to rise strongly in the next few years. But there’s no profit on the cards as far out as 2026. Losses are, at least, expected to fall by about half by then.

The technology does sound good (as far as I understand it). But the company’s finances don’t look great to me. For the year ended June 2023, Renalytix recorded a loss of $46.2m. At least that was down from $56.7m the year before, but there’s still a lot of cash burn happening.

For the first quarter of the current year, the net loss came in at $10.2m. At 30 September, the firm had only $13.9m in cash and equivalents on the books.

New progress

In recent weeks though, we’ve seen more positive data for the uptake and success of KidneyIntelX. It also looks like the techology is on the way to getting approval for Medicare patients in the US.

The firm says that “on February 8, 2024 the Centers for Medicare and Medicaid Services (‘CMS’) published a draft Local Coverage Determination (LCD)“, with a price of $950 per test. A final LCD is expected sometime this year.

This looks like solid progress, and it could bring first profits a bit closer. But, for me, there’s still too much uncertainty and risk.

I don’t know how much more cash the company will need to raise to reach profitability. And that means I’ve no idea how much dilution I might face if I buy now.

The post After the Renalytix share price jumps 500% in 3 days, is it time to buy? appeared first on The Motley Fool UK.

But with the young company still in growth mode, could this be a good time to take advantage of the Renalytix share price and add to my holding? Or might the price fall further?

Growing pains

I think the issue here is a common one when it comes to investing in growth companies.

On one hand, the firm has attractive technology with a growing client base and increasing proof of clinical effectiveness. Its potential target market is big and Renaytix has barely tapped into it yet.

But on the other hand, growing a business takes time – and money. Renalytix has spent millions on building a large salesforce to get out in the field and introduce its technology to potential customers. But a lot of that activity has not yet led to sales.

So while revenues have been growing fast (albeit from a small base), the lossmaking company continues to bleed red ink.

Moving forward

Some growth companies resolve that conundrum, getting their cost base in check and ramping up sales to the point where they can start to turn a profit.

Others simply do not make it, even when they have promising technology. Commercialisation is key when it comes to turning promising technology into a compelling business.

Thankfully, Renalytix continues to announce good news. In the past 10 days it has unveiled new insurance coverage with CareFirst BlueCross BlueShield, a large US healthcare plan provider. As the company continues to grow the number of health insurers who will reimburse patients for using Renalytix services, that ought to be good for revenues and profits.

Ongoing financial challenges

The issue I see is the economics of the business. In the first half of its financial year, the company recorded a loss of $22.6m on revenues of $2.1m.

That concerns me for several reasons. Expenses are vastly higher than revenues, which is not a sustainable business model in the long term.

On top of that, losses were close to last year’s $22.9m.  I have been expecting Renalytix to cut costs sharply as it seeks to find a pathway to profitability. So far however, there is little evidence of cost-cutting having any impact on financial performance.

Long road ahead

So while I like the technology, I do not like the current business model. The lack of profitability is a concern for me and the scale of the losses is alarming.

Despite the share price falling 42% in a year, I think this could still be a falling knife to catch. If Renalytix can cut its losses sharply, today’s share price might ultimately turn out to be a bargain. For now though, that remains highly uncertain, in my view.

I have no plans to buy any more Renalytix shares in the absence of clearer positive proof of a move towards profitability.

The post Is the Renalytix share price a bargain or a falling knife? appeared first on The Motley Fool UK.

What is going on – and how ought I to respond as a shareholder?

Good news

The reason for yesterday’s jump was the release of some good news by the company.

A new study showed that patients in the early stages of diabetic kidney disease who were being treated with the company’s flagship KidneyIntelX tool received higher follow-up medical visit rates within a month than those who were not. That may suggest that the tool’s diagnostic capabilities enable quicker treatment than for patients whose kidney disease goes undiagnosed for longer.

This is the latest in a growing pile of research that provides a clinical basis for doctors to use the tool.

Bad news

However, fast forward 24 hours to today and things already look less positive for the business. Renalytix released its latest quarterly results and they contain a lot of red ink.

The period saw a net loss of $12m. Revenue was only $969,000. Although that is fairly modest, it is more than double what Renalytix achieved in the same period last year. So revenue growth far outstripped the 18% increase in net loss.

Nonetheless, the mismatch between revenues and losses is huge. Renalytix is spending vast sums of money to make relatively modest sales. In the long term, that is not a sustainable business model.

Looking to the future

I think that mismatch between the top and bottom lines of the company’s profit and loss account explains the implosion of the Renalytix share price over the past year.

Spending heavily may be necessary to build the sales base for the company’s products. But if it is spending far more than it is making in sales, it will not be profitable. Instead, it will burn even more cash, raising the risk of shareholder dilution or ultimately even bankruptcy.

The latest trading statement contained an outlook with disappointingly little forward-looking analysis. Rather defensively, in my view, it reminded readers that building scale for the company’s product sales involves a lot of work and “it sometimes seems this set of milestones takes a long time to accomplish”.

That sounds to me like a cloaked admission that business development is not moving at the same high pace as cash burn, which is obvious to anyone who looks at the company accounts.

Although the company announced plans in August to reduce annual expenditures by over $12m, in the most recent quarter its general and administrative expenses actually inched up.

The share price could fall further

At the end of September, the company had cash and cash equivalents of $31m. Liquidity is not an immediate risk, but if costs continue to outstrip revenues substantially, that will change.

I think Renalytix has powerful technology. The latest research further shows that it could be helpful for hospitals to adapt it. But the business model remains woeful. I am keeping my shares because it is hardly worth selling them at the current price, given the dealing fees involved. But I will definitely not be buying any more!

The post What’s going on with the Renalytix share price? appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

BAE Systems 

What it does: BAE Systems is one of the world’s leading defence companies and a major supplier to UK and US armed forces.  

By Royston Wild. Defence giant BAE Systems (LSE: BA) is the best-performing FTSE 100 share over the past six months at the time of writing. 

In fact, it’s risen around 40% in value in the year to date. And more recently its share price has remained rock-solid whilst other UK shares have toiled in this new bear market. 

I think the Footsie firm remains an ideal growth stock for me to buy today. Soaring inflation and growing recessionary risks pose a threat to more cyclical stocks. Defence stocks like BAE Systems, on the other hand, can expect trading conditions to remain robust in the near term, meaning investor selling should be kept to a minimum. 

Government defence spending is something that remains broadly resistant to wider economic conditions. War is a constant of history and countries have to be prepared to defend themselves at a moment’s notice. 

This explains why City analysts think BAE Systems’ annual earnings will rise 7% in both 2022 and 2023. This is despite the threat that supply chain problems pose to its operations. 

Royston Wild does not own shares in BAE Systems. 

Experian

What it does: Experian provides credit data to lenders to allow them to assess the creditworthiness of potential borrowers.

By Stephen Wright. I’m keeping things simple with my top UK growth share for July. 

In my view, a good growth stock is one that grows. Specifically, it grows its earnings and then uses those earnings to generate more earnings. This is exactly what Experian (LSE:EXPN) does. 

The company’s strong growth is protected by a high barrier to entry. Experian has a huge database of credit information that it bases its credit scores on, and this would be difficult for a smaller competitor to emulate.

Furthermore, most mortgages require a tri-merge report. Experian’s credit report is part of this, which makes me think that the business will continue to do well going forward.

I’m impressed by the company’s growth and I think that shares trade at a reasonable price at the moment. As such, I’m looking at adding to my investment in Experian stock in July.

Stephen Wright owns shares in Experian.

Coats

What it does: Coats is the world’s leading industrial thread manufacturer. It operates in sectors including fashion, energy and telecoms.

By Roland Head. Thread maker Coats (LSE: COA) is a business that many investors have never heard of, even though we probably all use its products.

This British business has been trading for more than 250 years and operates in 50 countries, with annual sales over $1.5bn.

Analysts expect Coats’ earnings to rise by 13% this year and by 17% in 2022. Despite this positive outlook, the shares currently trade on just 10 times forecast earnings. I reckon that’s too cheap for a business which generated a 21% return on equity last year.

I admit that Coats has disappointed the market before. Demand for some of the company’s products could also fall in a recession.

However, I think the diversity of Coats’ customers should provide protection against localised problems. I’m also impressed by the changes being put in place by CEO Rajiv Sharma. I expect strong growth over the next few years.

Roland Head owns shares in Coats.

JD Sports Fashion

What it does: JD Sports Fashion is a retailer of athletic footwear and athleisure clothing that operates globally.

By Edward Sheldon, CFA. Shares in JD Sports Fashion (LSE: JD) have taken a huge hit in 2022, and I think this has presented me with a great opportunity to buy the growth stock in July.

JD’s full-year FY2022 results, posted in June, were very encouraging to my mind. For the 52 weeks ended 29 January 2022, revenue came in at £8.56bn, up 39% year on year. Meanwhile, adjusted earnings per share (EPS) jumped to 12.8p versus 6.4p a year earlier.

Looking ahead, I’m not expecting growth to continue at this pace. However, in the long run, I expect demand for casual attire to boost revenues and profits significantly.

One risk to consider here is a pullback in consumer spending due to the cost-of-living crisis. This could hit sales. However, with the stock now trading on a forward-looking P/E ratio of under 10, I think a lot of this risk is priced into the stock already.

Edward Sheldon has no position in JD Sports.

Future

What it does: Future is a massive media conglomerate serving digital media on a variety of topics to a global audience of over 300 million people.

By  Zaven Boyrazian. Investing in a media publishing house may sound old fashioned. But it’s proven to be a lucrative move for shareholders of Future (LSE:FUTR). The company is one of the largest media groups in the world, with over 250 websites under its umbrella, including TechRadar, Country Life, and its recently acquired Who What Wear. And over the last five years, the stock is up 700%!

Revenue is primarily generated through advertising and subscriptions. But with more service platforms like GoCompare emerging in its brand portfolio, the company has begun earning considerable income through affiliate fees.

Despite delivering high-double digit growth so far this year, shares have since taken quite a tumble thanks to investor sentiment waning. There are undoubtedly risks surrounding management’s primarily acquisition-driven approach. However, with an excellent track record, I can’t help but see this slump as a buying opportunity for my investment portfolio.

Zaven Boyrazian does not own shares in Future.

Molten Ventures

What it does: Molten Ventures is a UK-based tech-focused venture capital firm with a track record of backing now-listed businesses from very early stages.

By Andrew Woods. Molten Ventures (LSE:GROW) performed well during the pandemic. For the year ended March, between 2021 and 2022, pre-tax profit grew from £267m to £325m. The value of the firm’s gross portfolio also rose from £984m to £1.53bn over the same period.

The company’s most exciting performance, however, is in its earnings-per-share (EPS) growth. Between 2018 and 2022, EPS rose from 89p per share to 200p. By my calculation, this means the firm had a compound annual EPS growth rate of 17.6%. While past performance is not necessarily indicative of future performance, this growth rate is extremely attractive.

The company’s most recent net asset value (NAV) was 937p per share in March. While this is now a few months old, it’s clear that the current share price of 460p is a significant discount. Despite this, the broader economic environment has hit tech stocks particularly hard. There may be a further slide as inflation increases and interest rates continue to rise.

Andrew Woods does not own shares in Molten Ventures.

Renalytix

What it does: Renalytix develops and sells medical devices that can diagnose risk indicators for kidney disease.

By Christopher Ruane. I own shares in Renalytix (LSE:RENX) and so far it has been an absolute dog! The shares have lost 85% of their value in the past year alone. Definitely there are still risks here, such as the substantial costs required to sell the company’s system into more healthcare providers.

But I also see a potentially fantastic opportunity if things go well. There is clinical evidence that the technology can help improve diagnostic outcomes. A presentation this month revealed its positive impact at a leading New York healthcare provider.

Kidney disease is the direct cause of over a million deaths globally each year. If Renalytix can sell its innovative, proven system into more healthcare groups, the scalability of its business model could generate higher revenues without adding costs at the same speed. In the long term I remain optimistic about the outlook, but recognise the risks involved.

Christopher Ruane owns shares in Renalytix.

Spirax-Sarco Engineering

What it does: Sprirax-Sarco Engineering is a UK-based industrial engineering company focused on thermal energy management

By Paul Summers: Cheltenham-based Sprirax-Sarco Engineering (LSE: SPX) is a high-quality company I’ve been monitoring for a while now. A world leader at what it does, the FTSE 100 member has long generated high margins and returns on the capital it invests. It’s these hallmarks that have been found to reward growth investors like me handsomely over time.

The only problem with all this is that the stock has always looked extremely expensive. Until now, that is. A 40% slide in the share price in 2022 leaves Spirax trading at almost 28 times earnings. Granted, that’s still not cheap. However, the idea of beginning to build a position here for the long term now looks far more palatable. 

There’s always a chance things could get worse before they get better if we get a recession. However, high customer loyalty should mean the pain should be temporary.

Paul Summers does not own shares in Spirax-Sarco Engineering

Carnival

What it does: Carnival operates a list of renowned cruise line brands. It sells deals and cruise packages to popular destinations.

By John Choong. Carnival (LSE:CCL) was close to hitting a five-year low in June, but positive guidance provided in its most recent trading update sent its share price rocketing by more than 10%. While this is minuscule on the wider scale of things, there are reasons to be optimistic about a potential recovery.

Despite the firm missing analysts’ estimates on earnings per share, revenue and room occupancy rate, revenue grew by almost 50%. More importantly, I was impressed with the company’s future bookings. The figure came in nearly double of Q1 2022, marking its best figure since the beginning of the pandemic. This is something to cheer for, because future bookings bring in the much-needed cash Carnival requires to return to profitability.

Provided that travel tailwinds continue to persist, Carnival could pull off a monumental recovery, pay off its debt gradually, and even achieve positive free cash flow soon. As such, grabbing shares at the current price could be a steal for years to come.

John Choong has no position in Carnival

The post Best British growth shares for July appeared first on The Motley Fool UK.

What has caused this – and what should be my next move as an investor?

Weak results

The immediate cause for today’s fall is the company’s most recent quarterly trading statement, which it published this morning.

Revenue was just $0.8m. That is an increase from $0.6m in the same period a year ago. But it is still miniscule.

Meanwhile, the company continues to spend heavily. The profit and loss account is ugly. General and administrative expenses for the quarter almost doubled compared to the prior-year period, reaching $10.8m.

Other costs also grew, leading to a $14.7m loss for the quarter. That looks uncomfortably large for a company with a market capitalisation of just £92m.

At the end of March, the company had $32.2m in cash and cash equivalents. Since then, it has raised nearly $27m in financing. Still, at the current level of cash burn, that liquidity is barely enough to see the company through another year.

I have always felt Renalytix needs to grow sales fast to reduce its losses. But with revenues still as low as they are, the current level of cash burn looks unsustainable unless the company raises more money in the coming year. That risks diluting shareholders if it takes the form of a rights issue.

What comes next?

I continue to be optimistic about the outlook for the Renalytix’s kidney disease diagnostic platform. The company is rolling out the technology to a wider range of healthcare providers. It has also secured coverage from a growing pool of insurance providers.

Renalytix expects revenue this year to come in at $2.9m, almost double what it managed last year. That is an impressive growth rate, albeit from a low base.

Still, selling expenses continue to be a big concern for me. Even if sales double this year, and do the same again next year, the company will still be lossmaking if it keeps its current cost base.

The costs of a salesforce are necessary to grow sales fast – but they are eating into a shrinking cash pile. While the projected revenue growth for this year is good, it still will not fix Renalytix’s problem of spending far more than it earns.

My move on the Renalytix share price

Renalytix is different to most shares I own. Normally I like a company to have a proven, profitable business model before I invest. By contrast, Renalytix is spending to grow. That makes it heavily lossmaking.

I think the technology is strong and continue to see potential. With the Renalytix share price just over a tenth of what it was a year ago, I am actually considering investing a little bit more in the company as I do think its long-term sales potential is very strong. But I recognise there is a real risk that, if Renalytix cannot grow sales fast enough to cover its cost base, at some point the shares could go to zero.

The post Here’s why the Renalytix share price is tanking appeared first on The Motley Fool UK.

S4 Capital

Last year, digital media agency holding group S4 Capital (LSE: SFOR) saw its share price soar 27%. In 2022, though, things have got off to a bad start. S4 shares have fallen 18%, meaning that over the past 12 months they only show a 5% gain.

I see that as a buying opportunity for my portfolio. S4 is a larger business than it was a year ago and I think its growth prospects are also more attractive. It plans to grow revenues and gross profits organically by 100% in just three years. On top of that, the highly acquisitive company will likely see bolt-on growth. It has been adding big clients as well as expanding its service offering.

UK growth shares I would buy now

Full-year results from S4 are due next month and they should give indications about how the business is doing. Fast growth has seen headcount balloon to over 8,000. The costs of managing such a large team could eat into profit margins. S4’s large exposure to tech clients such as Google parent Alphabet could mean revenues are hurt if the sector tightens its belt when it comes to spending.

But the rapid growth points to the fact that the S4 model clearly appeals to clients. It has a global team of top talent and is growing its lead on competitors when it comes to developing digital marketing offerings. I expect strong growth to lead the share price upwards again. I would gladly spend £150 on S4 Capital shares for my portfolio.

Renalytix

Kidney diagnostics specialist Renalytix (LSE: RENX) has had a very bumpy year, with its share price tumbling 59% in 12 months.

Some of that fall reflects risks I think could indeed be significant. The company’s revenue is small and there is no guarantee it will ever reach critical mass. The company is hoping to grow revenues by recruiting a big sales force. But that is costly and will eat into profits.

Despite the risks, I think there is a very interesting investment case at Renalytix. The market for kidney diagnosis is large and set to grow in future. Renalytix’s platform is already proving its worth to doctors, with a growing number of scientific studies to support it. The digital nature means it is scalable. So, while currently Renalytix is spending on large upfront costs like sales teams, over time hopefully the more installations Renalytix can achieve the better its profit margin will become. With a large, growing market size, a unique product, and a strategy to sell to large healthcare providers in the US, I think Renalytix could turn out to be a highly profitable business in future.

As the share price falls indicate, many investors continue to question the long-term prospects for Renalytix and how much money it will need to spend to build a profitable business at scale. But I continue to think the outlook is positive. I would happily spend £150 on Renalytix shares for my portfolio.

The post 2 beaten down UK growth shares to buy now with a spare £300 appeared first on The Motley Fool UK.

Is this a sign I should cut my losses – or a buying opportunity for my portfolio?

Medtech pioneer

The share in question is Renalytix (LSE: RENX). The company is not very well-known. That is partly because of its short history. It’s also because it focuses on the US medical sector, despite its London listing. Its flagship product is a kidney diagnostics platform. The company thinks it is a cost-effective way for doctors and medical care providers to diagnose certain kidney conditions.

That could potentially be a big market. Renalytix has proprietary technology and growing clinical support. It has made inroads into selling its services to medical providers. To date though, it remains in the early stages of commercialisation. In the first quarter, for example, revenue was just $0.5m. While that is better than the zero figure it recorded in the same quarter of the prior year, it is still a small amount. Even after the share price fall, Renalytix commands a market capitalisation of £286m.

Tumbling share price

The Renalytix share price was doing well until the end of July. Since then, it has steadily slid downwards. It has given up 37% since the start of this year, but the decline had already set in months before that.

After an initial flurry of excitement in the early months of Renalytix’s listing, I think increased investor focus on short-term business results has hurt the share price. Clearly the company’s product has potential. But it will take time and money to try and realise that potential. This has become clearer as Renalytix has ramped up its sales efforts by recruiting more staff. General and administrative costs in the quarter almost doubled on the year. The company identified increased headcount as a key driver for that increase.

Over time, if the sales effort pays off by generating substantial new revenue, I think it could trigger investors to start focusing once more on the long-term potential for Renalytix. But at the moment, a lot of shareholder attention is on the cost and speed of the sales push. If that continues to be the case, I think the share price could keep sliding from here.

I would still buy this UK medtech share

Despite that, I currently have no plans to sell my Renalytix shares. Indeed, I would consider using the current price weakness to increase my position.

The market size for kidney diagnostics is huge — and growing. Renalytix has an excellent product that could help it get a good share of the market. The more it sells, the greater the benefits of scale should be for it. So, if it can build revenue strongly enough, that could turn out to be very good news for profitability.

For now it remains to be seen if that will happen. The attractive economics of this business area could lead to more competition, hurting its long-term profitability. But despite that risk, I continue to see the company as an appealing UK medtech share for my portfolio.

The post This UK medtech share has tumbled 60%. Why would I keep buying? appeared first on The Motley Fool UK.

Could this be a buying opportunity for the kidney diagnostics specialist? Below I consider what has been driving the share price action and whether I should add Renalytix back into my portfolio.

The growth challenge

Early investor sentiment (including mine) on Renalytix was positive. Its proprietary diagnostic platform offered an attractive business model. Development costs could be substantial. But the platform’s scalability meant that if enough healthcare users signed up, the profits could be substantial.

I think that continues to be the case. But the Renalytix share price is now showing some impact from the challenge of meeting high growth expectations. To launch a service from a standing start requires substantial investment in things like sales capability. In a regulated industry such as healthcare, it can take a while for potential customers to start buying new services. That means revenue growth can be slow at first, while costs stack up.

Growing costs

That’s exactly the picture right now at Renalytix, as shown in the company’s latest set of quarterly results that it released this week. The company has expanded its sales force, begun clinical testing with a couple of new healthcare providers and increased the ordering base in its launch site.

Revenues remain very modest, but at $0.5m they do compare favourably to the zero revenues reported in the equivalent quarter last year. However, quarterly operating expenses also ballooned, from $5.4m to $12.1m. That led to a larger loss for the quarter than in the comparable period, of $10.1m.

Is Renalytix moving in the right direction?

What does all this mean for the company’s outlook? It’s hard to tell just yet. A growing sales force should lead to higher revenues over time. There are signs that things are moving in the right direction on that score, with increased testing and service rollout, albeit still on a limited scale.

But that’s coming in at a growing cost. Net cash outflow due to operating activities in the quarter was $10.5m. With cash and cash equivalents on hand of $54.3m at the end of September, the company has enough cash for around five quarters of such net cash outflow. But a growing cost base as headcount grows could lead to cash outflow quickening. One solution to that would be to raise more funds, for example by issuing shares. That risks diluting existing shareholders.

On balance, I think the company is making the right moves, but it’s too early to tell if they will produce the desired financial results. That explains the fall in the Renalytix share price, I feel. And I think it could fall further in coming quarters if revenues don’t grow substantially.

My next move

I continue to like the Renalytix story. It has a large addressable market and attractive proprietary technology with growing clinical proof to help attract healthcare customers.

But revenues are yet to take off in a big way, while costs are mounting. In the absence of further positive sales news, I won’t be buying Renalytix again for my portfolio right now.

The post What’s going on with the Renalytix share price? appeared first on The Motley Fool UK.

To reduce my risk through diversification, I’d put £1,000 into each of them.

Banking giant

I think Lloyds (LSE: LLOY) remains an attractive home for £1,000 even after the share price has risen 49% in the past year.

A FTSE 100 stock selling at penny share prices is a rare thing. But despite its price tag, this isn’t some minnow. Lloyds has a market capitalisation of £33bn. It is one of the biggest banks in the UK, and the leader in the mortgage sector.

I also think the bank is in rude health. Even during the pandemic last year, it managed to turn a post-tax profit of £1.4bn. It has restarted dividends and plans to increase them in future. I think the dividend outlook, profitable business, and strong market position are all plus points for the Lloyds investment case. I see Lloyds as shares to invest in for my portfolio.

One risk, however, is its heavy concentration in a single market. If the UK economy struggles, that will likely hit Lloyds’ revenue and profits.

Growth shares to invest in

Banking is a mature market, so, as well as Lloyds, I’d look for a growth name in which to invest £1,000.

One growth name I would consider is Renalytix (LSE: RENX). Shares in this developer of AI-enhanced kidney diagnostic tools have more than doubled over the past year. But I think there could be further growth ahead.

The company has recruited a new team of experienced executives to help ramp up its sales operations. It has secured agreement to offer its services to large parts of the US government. The company’s diagnostic platform could enable medical professionals to provide a vital service to patients effectively. A clinical study this year confirmed its efficacy.

As a growth stock, though, there are clear risks here. The company has no revenue to speak of so far, so there is a risk that commercialisation could turn out to be slower and less successful than the company hopes.

Tasty opportunity

I think now is a good time to look again at Domino’s Pizza (LSE: DOM). I would consider these as shares to invest in with £1,000 of the £3,000.

The well-known chain of pizza shops has focussed once again on the British Isles after years of trying to crack the European market. Last month it finalised the sale of its Icelandic business. I think that is positive, as it has economies of scale in the UK it lacked elsewhere. Even after lockdown, demand for takeout sales looks set to remain strong. In its first quarter, system sales in the UK and Republic of Ireland grew 18.7%.

The company formula is simple and proven. I think Domino’s could continue to perform well in coming years. But I do think its menu could be a risk, as consumers shift towards a healthier diet and advertising restrictions grow on food stigmatised as unhealthy. That could hurt sales down the line.

The post 3 shares to invest in with £3,000 appeared first on The Motley Fool UK.