I proceed to see doubtlessly profitable alternatives within the penny inventory and small-cap house. Most of those shares have been hammered since rates of interest surged greater in 2022.

That’s comprehensible as a result of greater charges improve borrowing prices and lift the danger of smaller enterprises going below. Nonetheless, I feel there’s been an overreaction in some circumstances.

One is Creo Medical (LSE: CREO). Regardless of buying and selling at 28.5p, I name it a former penny inventory as its £103m market-cap simply edges above the £100m threshold sometimes used to categorise such shares.

In keeping with dealer Deutsche Financial institution, it has the potential to surge 171% to 80p. In the meantime, Cavendish Capital Markets analyst Chris Donnellan has a 99p price goal for the inventory.

In fact, there’s no assure it should ever attain 99p (and even 30p). But when it does, that’s a whopping 235% above the present price!

Progressive gadgets

Creo’s a medical know-how firm specialising in electrosurgical gadgets. These deal with pre-cancer and most cancers sufferers with larger accuracy, minimising injury to surrounding tissue throughout endoscopic (minimally invasive) surgical procedure.

The agency’s revolutionary flagship product, Speedboat, can inject, dissect, and coagulate (promote clotting) by means of a single instrument. That is powered by a know-how platform referred to as Croma, which integrates superior microwave and radiofrequency vitality sources.

This could flip what would sometimes be a diagnostic endoscopy right into a minimally invasive process, creating higher outcomes for sufferers and saving healthcare methods a small fortune.

For instance, latest NHS Provide Chain information confirmed internet money financial savings of £687k from 130 Speedboat procedures at one NHS Belief. That’s simply over £5,000 saved per process.

A high-growth enterprise

Final yr, the agency reported income of £30.8m. Brokers see that rising by 29% this yr to succeed in round £40m earlier than topping £53m in 2025 (32% year-on-year development). So income’s anticipated to speed up which, as a shareholder, I’m hoping will likely be a optimistic for the inventory.

Nonetheless, the corporate’s but to show a revenue. It recorded a £21.7m internet loss final yr. This lack of profitability’s a key danger with the inventory and largely explains its decline.

Once more although, progress is being made right here. The agency expects to realize cashflow break even in 2025, whereas forecasts see the pre-tax loss shrinking to round £4m by then. It ended final yr with a internet money place of £18.5m.

Extra development appears seemingly

Curiously, the share price was above 200p as lately as August 2021 when the agency was posting solely £9.4m in income. Now that determine’s forecast to surge above £53m and the share price is down at 28p.

It wouldn’t shock me to see the inventory rise above 100p once more if the agency retains rising and, crucially, strikes nearer to profitability.

Extra development appears more likely to me. Its newest Speedboat UltraSlim gadget, which improves compatibility with a broader vary of endoscopes, is already getting used within the EU, US, Latin America and Asia Pacific.

In the meantime, its coaching programme continues to develop worldwide customers, with a 119% improve over the course of 2023. The extra surgeons skilled, the extra procedures are more likely to happen, rising Creo’s income from the single-use devices that must be changed after every process.

I added to my holding in July. Now I’m crossing my fingers for these 100%-200% share price good points!