Here, I’m going to highlight a penny stock that City analysts are very bullish on right now. It currently trades for just 13.8p, meaning that £1,000 buys around 7,200 shares.

A healthcare game-changer

The stock in focus today is Creo Medical (LSE: CREO). It’s an innovative medical device company that specialises in instruments for endoscopic (minimally invasive) surgery.

Its products include Speedboat Inject, a multimodal endoscopic instrument that can be used by surgeons to dissect, cut out, inject, seal and more when operating on pre-cancer and cancer patients, and Speedboat Ultraslim, a slimmer version designed to reach deep/tight spots in the digestive tract. With these products, surgeons can perform complex procedures entirely through an endoscope and patients can potentially avoid major surgery.

Expect a wild ride

Now, this is a very small company. Currently, its market-cap is only £59m. Companies of this size tend to be risky investments because their share prices tend to swing wildly due to a lack of trading liquidity.

They often also have new technologies that are unproven at scale, and lack profitability. And that’s the case here – this is relatively new technology and the company isn’t making a profit.

Analysts are very bullish on Creo Medical however. Currently, the average price target is 40p – about 190% above the current share price.

A strong performance in 2025

While analysts’ share price targets need to be taken with a grain of salt, I can see why they’re bullish here. At present, Creo has momentum.

For 2025:

• Revenue was up 50% year on year to £6m (with second half revenue up 58%) thanks to continued clinical adoption of its products.
• Underlying operating costs were down 20% to £18.4m thanks to cost control.
• The cash balance at the end of the year was £12.4m versus £8.7m a year earlier.

Huge growth expected in 2026

Looking ahead, the company said that the outlook for FY2026 and beyond is positive. This year, it expects continued sequential growth period-on-period along with improved operational efficiency.

“Strategically, our products are well positioned in growing attractive markets creating significant potential for shareholder returns.”
Creo Medical chair Kevin Crofton

It’s worth noting that at present, analysts expect Creo to generate revenue of £10.2m this year. There’s no guarantee the company will be able to deliver on this figure, but if it did, it would represent top-line growth of a whopping 70%.

Is there an investment opportunity here?

So is this penny stock worth a closer look? I think so. It’s not a stock I’d go ‘all in’ on. There are plenty of risks and it could end up tanking. I see a lot of potential at the current share price though. In my view, it’s worthy of further research.

The post £1,000 buys 7,200 shares in this UK penny stock that’s tipped to rise 190% appeared first on The Twelfth Magpie.

Volatility is a key concern. Investors considering these high-risk investment propositions need the stomach to endure massive share price movements in pursuit of portfolio gains. In short, they’re not for the faint-hearted.

One company that’s no stranger to volatility is Creo Medical (LSE:CREO). This AIM-listed healthcare device business specialises in minimally invasive surgical endoscopy. Trading at a 52-week low after a prolonged losing streak, is today the perfect time to buy this beaten-down penny stock?

A falling share price

Creo Medical has seen its market cap evaporate in recent years as its share price has taken a battering. Today, the stock market minnow’s valued for less than £52m.

There are some worrying signs in this penny stock for potential investors to monitor closely. The firm’s FY24 revenues failed to meet market expectations. The group total of £30.4m represented a 1.3% decline compared to the prior year’s figure of £30.8m. Frankly, it’s concerning to see the company going into reverse gear on such a crucial metric.

Creo Medical has also yet to turn a profit. The board expects FY25 will be another loss-making year. I’m worried more cash will need to be raised before the business becomes a profitable enterprise, which may not be easy given that it has historically experienced fundraising difficulties.

That said, in February, the company secured £25m in net inflows from divesting a majority stake in its European consumables business to a Chinese medical device manufacturer. Coupled with a £12.1m equity raise last year, Creo Medical has some financial headroom for the near future at least.

Recovery potential

On the bright side, this month marked the commercial launch of a new product — the SpydrBlade Flex — in the UK and EU. This could provide a much-needed boost for the company’s bottom line. The multi-modal endoscopic device has promising applications for minimally invasive treatment of colorectal cancer.

In addition, the potential of Creo Medical’s core offering can’t be understated. Its flagship Speedboat product suite uses remarkable technology. These tiny surgical instruments offer surgeons a one-stop shop to carry out incision, dissection, and coagulation procedures without needing to change devices.

The market opportunity is considerable. Some analysts believe the gastrointestinal endoscopic technologies market could be worth between £2.32bn and £2.48bn. If Creo Medical can successfully realise the commercial potential of its products, the shares could ultimately prove to be a lucrative investment at this early stage.

A penny stock to consider?

Like all penny stocks, Creo Medical faces significant risks. The fact that the shares were once changing hands for nearly £2.30, compared to 12.5p today, proves as much.

Nonetheless, the company’s risk/reward profile looks attractive to me right now at this low valuation. Improvement will be needed across a range of core financial yardsticks, but the firm’s unique patented technologies show significant promise.

So, is Creo Medical a bargain stock? Quite possibly! Bargain of the year? That’s probably a stretch. But for investors with sufficient risk appetites, I think this penny share deserves consideration.

The post At a 52-week low, is this penny stock the bargain of the year? appeared first on The Twelfth Magpie.

On 17 February, shareholders got a trading update from the £65m medical device firm. Was it any good? Let’s take a look.

Mixed update

AIM-listed Creo Medical makes minimally invasive electrosurgical devices. Its flagship Speedboat product can do multiple things — cut, coagulate, dissect, and inject — in a single instrument, eliminating the need for multiple tools.

The company is transitioning from the development phase to full commercialisation, and its devices are being used in a growing number of hospitals. In the full-year trading update, though, we saw mixed results.

Revenue for 2024 is expected to be roughly £30.4m, down slightly from 2023’s £30.8m. Within this, Creo Core Technology revenue grew 74% to £4m, with the second half achieving a 50% growth in sales. This covers sales from all core products, including its latest Speedboat UltraSlim device. Management said there had been “significant new customer additions during the period“.

Elsewhere, its innovative MicroBlate Flex device is making progress in robotic-guided lung cancer procedures. It’s now in use with Intuitive Surgical’s Ion robot system at two UK hospitals. More sites are to launch soon, with the expectation that these will becoming revenue-generating after initial cases. Unfortunately though, no revenue was recorded here during the period.

Regarding 2025, the company said it had made a “positive” start to the year, with trading in line with expectations.

Decent cash position

Earlier this month, Creo completed the sale of 51% of its Creo Europe consumables business to Micro-Tech, a Chinese firm. Creo Europe markets both its own and third-party consumables and systems.

Following this, the group’s cash position was £31.2m. It said this strategic sale “strengthens Creo’s commercial platform and enables Creo to continue to fund the ongoing strategic development of its core technology business“.

Meanwhile, the company says it has reduced operating costs by £5m, with the full benefit to be seen this year. We won’t know exactly how much the firm has been losing till the full earnings results in April.

According to analysts at Edison, cash-flow breakeven is now likely to be achieved in 2028 versus 2025 previously. Therefore, Creo is expected to be loss-making for some time, which obviously adds risk.

My thoughts

The deal with Intuitive still looks promising to me, with sites now performing combined lung diagnosis and procedures with the robotic system and Creo’s MicroBlate Flex device. This could eventually be a high-margin revenue stream.

The company also has dry powder to invest in its core business, and I expect a significant ramp-up in revenue from just £4m. If that doesn’t happen, the stock could fall even further.

I’m optimistic it can recover, however, if I’m patient. Indeed, broker Cavendish has reiterated its 70p share price target — over 330% higher than the current level (no guarantees it will end up there, of course). It said it now expects Creo to reach “profitability utilising its internal resources“.

At 15p, Creo might be worth a look for risk-tolerant investors. As for me, I’m going to keep the shares I already hold, but I won’t buy any more.

The post 1 penny stock down nearly 50% in my Stocks and Shares ISA! appeared first on The Twelfth Magpie.

Medical devices

Creo Medical Group (LSE: CREO) makes medical instruments for surgical endoscopy, using microwave and radio frequencies. Minimally-invasive surgery can expose patients to less danger, and reduce costs.

But after an impressive start to stock market life, the Creo share price collapsed. In the past five years, it’s crashed 89%. The shares are down to 18p for a market capitalisation of £73m.

Creo‘s been one of those promising growth stock candidates we see so often. But it’s yet to make an annual profit. And forecasts suggest that’s still unlikely to happen by 2026. But at least they show the losses falling steadily.

Balance sheet boost

I see signs that 2025 could be the year that things change. In September, a new share issue raised £12m, so we’ve already had some dilution. With interim results the same month, CEO Craig Gulliford said: “The launch of Speedboat UltraSlim in late 2023, our smallest device to date, was a significant milestone and helped us to achieve record core product sales for H1-2024.”

That seems key to me. Will this new technology lead to profits in the nick of time? Or will the company need to go back to the market to raise more cash? It could all hinge on that. For investors who can handle the fear of cash running low again, I think Creo’s worth considering for its growth potential.

Smart sensing

Oxford Metrics (LSE: OMG) is profitable, with a strong balance sheet. The 2024 full year looks like it was a tough one, with adjusted earnings per share falling 44% to 5.29p. Net cash at 30 September, though healthy at £50.7m, declined 22%.

The company makes smart sensing and motion-capture technology. Its Vicon product is used in sports, education, film production, virtual reality and biomedical research. And it has an impressive list of customers, including Boeing and Ford.

But the share price is down 55% over five years, with most of that in the past 12 months. It’s down to 51p at the time of writing, for a market-cap of £65m. After a poor performance like that, why am I optimistic about Oxford Metrics?

Looking ahead

With those disappointing 2024 results, CEO Imogen O’Connor pointed out that they should be seen “against an exceptionally strong prior year comparator where our teams delivered more camera systems than ever before.”

And when it comes to the 2025 outlook, the full-year update spoke of “a good spread of opportunities across all main markets and a pipeline of new products”.

There’s clearly a risk of another painful year. But forecasts (though only from a couple of brokers) indicate a return to earnings growth and put a 97p target price on the stock. That has to make it worth further research.

The post 2 penny stocks with growth potential to consider buying in 2025 appeared first on The Twelfth Magpie.

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.

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.

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.

The post A company insider just bought 2,916,666 shares of this penny stock! appeared first on The Twelfth Magpie.

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

Creo Medical   

What it does: Creo Medical is a medical devices company that makes instruments used in endoscopic surgery.    

By Ben McPoland. I think shares of Creo Medical (LSE: CREO) look interesting after falling 42% this year. The innovative small-cap company manufactures devices that enable minimally invasive surgical procedures.

Last year, it more than doubled its user base and analysts expect revenue to jump 28% this year to around £39.6m. Its recently launched Speedboat UltraSlim, a device compatible with most endoscopes, is expected to drive further sales momentum in the years ahead. 

On 18 September, Creo announced the sale of 51% of its European business to China’s Micro-Tech (a leading endoscopic instrument company). If approved, this will net the firm approximately €36.7m, which it will use to fund its growth.

Creo says this deal will “support our continued commercial growth in the [Asia Pacific] region through product registration and co-branding in China.” Opening up opportunities in the massive Chinese healthcare market could prove to be very lucrative.

The main danger here is that the company’s still in growth mode and not yet profitable. It has a cash-flow break-even target for 2025, but the lack of earnings still heightens risk. 

Nevertheless, with the market cap now at £95m (as I write), the stock looks attractive to me given the growth potential.

Ben McPoland owns shares in Creo Medical.

hVIVO

What it does: Specialist contract research organisation (CRO) focused on human medical trials of vaccines and antivirals.

By Mark David Hartley. hVIVO (LSE: HVO) is a clinical research organisation that serves biopharma companies. It recruits volunteers for clinical trials through its FluCamp database, which boasts over 320,000 participants. It can be a risky business, as clinical trials face the threat of medical complications or even fatalities. This could cause reputational and financial damage to the company. 

The company’s latest results revealed a 30% year-on-year increase in revenue and 67% EBITDA growth, translating to a 24.5% margin. Basic adjusted earnings per share also saw a 30% increase. However, with a price-to-sales (P/S) ratio of 3, revenue is lagging the share price. 

Still, its balance sheet looks solid, with cash up from £31.3m to £37.1m in H1. Looking ahead, management anticipates an 11% increase in full-year revenue with a projection of at least £100m in revenue by 2028. That’s a compound annual growth rate of about 14%.

Mark David Hartley does not own shares in hVIVO.

Serica Energy

What it does: Serica is one of the top 10 oil and gas producers in the UK North Sea, with an output of more than 40,000 barrels per day.

By Roland Head. Shares in North Sea oil and gas producers have been hammered by the falling oil price and uncertainty over government energy policy. Serica Energy (LSE: SQZ) is no exception.

The company’s share price has fallen by 40% so far this year. The shares now trade on just three times forecast earnings, with an 18% dividend yield.

The Autumn Budget on 30 October may provide some welcome clarity. In the meantime, we know that Serica had $131m of net cash at the end of June.

Serica’s projections suggest that the company could generate another $500m of surplus cash from its current production by the end of 2027.

My main worry is that management may blow some of the group’s cash pile on a misguided foreign acquisition.

However, the company recently confirmed its support for the dividend, declaring an unchanged interim payout. I think the shares just look too cheap right now.

Roland Head owns shares in Serica Energy.

Warpaint

What it does: Warpaint sells colour cosmetics under its own brands, W7 and Technic. It sells through major retailers and via its own website.

By Harshil Patel. Warpaint (LSE:W7L) is going from strength to strength. Not only are sales and profits rising, but its profit margin is too.

Achieving this hat-trick is impressive and it’s what makes this AIM stock stand out from the crowd.

Its half-year pre-tax profit jumped by 76% from £6.2m to £10.9m. The company’s sales are weighted towards the second half of the year due to its gifting attributes. So, I’d expect more growth to come.

There are plenty of opportunities, both from existing retailers and through new major shops which it is currently in discussion with.

Warpaint offers many of the qualities that I look for in the best shares. Namely, it offers a return on capital employed of 42%, over 20% operating margin and a solid balance sheet.

There is competition in this space, but it looks like it’s taking market share from rivals.

I wrote about this Aim stock a year ago, and although its share price has doubled since, I still like it today.

Harshil Patel owns shares in Warpaint.

YouGov

What it does: YouGov is a British internet-based market research and data analytics firm with global operations.

By Muhammad Cheema. YouGov’s (LSE:YOU) 2024 has been torrid with its shares falling by almost 62%. Investors were particularly spooked by a profit warning in June, which caused a one-day drop of 46%. Debt of £214m on its balance sheet is also risky and doesn’t ease concerns.

However, I believe this has been blown way out of proportion. On its later trading update on 6 August, it guided for revenue of £327-330m and operating profit of £43-46m. For context, FY23 revenue and operating profit were £258m and £44m, respectively.

This doesn’t warrant the share price fall in my opinion and presents a potential buying opportunity for investors to consider. Revenue growth remains strong and even though earnings are broadly in line with last year, historically the company has a strong track record of increasing this. This might just be a blip in performance, especially as the firm is in a great position to capitalise on the rise of AI.

Muhammad Cheema does not own shares in YouGov.

The post Best AIM stocks to consider buying in October appeared first on The Twelfth Magpie.

That’s understandable because higher rates increase borrowing costs and raise the risk of smaller enterprises going under. However, I think there’s been an overreaction in some cases.

One is Creo Medical (LSE: CREO). Despite trading at 28.5p, I call it a former penny stock as its £103m market-cap just edges above the £100m threshold typically used to classify such shares.

According to broker Deutsche Bank, it has the potential to surge 171% to 80p. Meanwhile, Cavendish Capital Markets analyst Chris Donnellan has a 99p price objective for the stock.

Of course, there’s no guarantee it will ever reach 99p (or even 30p). But if it does, that’s a whopping 235% above the current price!

Innovative devices

Creo’s a medical technology company specialising in electrosurgical devices. These treat pre-cancer and cancer patients with greater accuracy, minimising damage to surrounding tissue during endoscopic (minimally invasive) surgery.

The firm’s innovative flagship product, Speedboat, can inject, dissect, and coagulate (promote clotting) through a single instrument. This is powered by a technology platform called Croma, which integrates advanced microwave and radiofrequency energy sources.

This can turn what would typically be a diagnostic endoscopy into a minimally invasive procedure, creating better outcomes for patients and saving healthcare systems a small fortune.

For example, recent NHS Supply Chain data confirmed net cash savings of £687k from 130 Speedboat procedures at one NHS Trust. That’s just over £5,000 saved per procedure.

A high-growth business

Last year, the firm reported revenue of £30.8m. Brokers see that increasing by 29% this year to reach around £40m before topping £53m in 2025 (32% year-on-year growth). So revenue’s expected to accelerate which, as a shareholder, I’m hoping will be a positive for the stock.

However, the company’s yet to turn a profit. It recorded a £21.7m net loss last year. This lack of profitability’s a key risk with the stock and largely explains its decline.

Again though, progress is being made here. The firm expects to achieve cashflow break even in 2025, while forecasts see the pre-tax loss shrinking to around £4m by then. It ended last year with a net cash position of £18.5m.

More growth seems likely

Interestingly, the share price was above 200p as recently as August 2021 when the firm was posting only £9.4m in revenue. Now that figure’s forecast to surge above £53m and the share price is down at 28p.

It wouldn’t surprise me to see the stock rise above 100p again if the firm keeps growing and, crucially, moves closer to profitability.

More growth seems likely to me. Its latest Speedboat UltraSlim device, which improves compatibility with a broader range of endoscopes, is already being used in the EU, US, Latin America and Asia Pacific.

Meanwhile, its training programme continues to grow worldwide users, with a 119% increase over the course of 2023. The more surgeons trained, the more procedures are likely to occur, increasing Creo’s revenue from the single-use instruments that need to be replaced after each procedure.

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

The post This ex-penny stock’s tipped for a 175-235% surge by City analysts! appeared first on The Twelfth Magpie.

Here are two growth stocks on my buy list for July.

Ashtead Technology

While many smaller stocks have been hammered in recent years, Ashtead Technology (LSE: AT.) has gone from strength to strength. In fact, it’s up 345% since listing in late 2021, and 85% over the last year.

Ashtead Technology — not to be confused with the FTSE 100‘s Ashtead Group, which it was originally part of — is a subsea equipment rental company. It hires out everything from seabed inspection cameras to winches and dredging systems.

It works with global blue-chip customers as they focus on the energy transition, both in offshore wind and the decommissioning of oil and gas infrastructure. Many of these are increasingly opting to rent equipment to lower capital expenditure.

One big reason for its share price success is that the firm’s profits have been growing nicely alongside a surging top line. Last year, revenue increased 51% year on year to £110m, with growth across all geographic markets. This was made up of 35% organic growth and the rest from acquisitions.

Gross margins improved to 78% from 74%, while adjusted earnings per share (EPS) surged 73% to 33.4p.

One thing to note here is that the firm will likely pursue more acquisitions. While these can fuel growth, they also increase debt, which increases risk.

So far though, the company has an excellent track in this department. Its return on invested capital (ROIC) is a healthy 28%.

The stock’s trading on a forward price-to-earnings (P/E) ratio of 18.8, which is attractive for a high-growth business.

Looking ahead, the company’s perfectly placed to benefit from the energy transition. It should enjoy strong structural growth in offshore wind, as well as steady growth across oil and gas (both in maintenance and decommissions).

Analysts expect the company’s revenue to nearly double to £200m by the end of 2026.

Creo Medical

The next stock, Creo Medical (LSE: CREO), has certainly taken a hammering in recent years. The share price is down 80% since mid-2019. Ouch!

Yet the medical device firm has never been in a better position than today. It specialises in electrosurgical instruments for endoscopic (minimally invasive) surgery.

Its flagship product is called Speedboat Inject. Surgeons use this device to dissect, cut out, inject, and more, when operating on patients with pre-cancerous or malignant lesions.

Creo plans to launch more products and is already licencing out its core technology to robotic companies such as Intuitive Surgical. In November, it released Speedboat UltraSlim, a more slender version with advanced features. Worldwide adoption of this device has been strong.

Last year, revenue rose 13% to £30.8m. But with a 119% increase in the user base of its technology, revenue is forecast to accelerate to £40m in 2024 (30% growth), then to £53.6m in 2025 (34%).  

One risk here is that Creo is still loss-making. It reported an operating loss of £24.5m last year. However, that was down from £30.9m in 2022, and the company’s aiming to reach cash flow break-even in 2025.

The post 2 top UK growth stocks I’m buying for my Stocks and Shares ISA in July appeared first on The Twelfth Magpie.

Creo Medical Group

What it does: Creo Medical manufactures instruments used in minimally invasive endoscopic surgery.   

By Ben McPoland. I reckon Creo Medical (LSE: CREO) stock has the potential to rise much further. In 2023, the medical device company is expected to have grown its revenue 13% to around £31m.  

In 2024 though, its top line is forecast to accelerate to around £40.6m as more surgeons are trained to use its Speedboat product. This versatile electrosurgical device is saving certain NHS hospitals a fortune as part of their bowel cancer and endoscopy services.

According to the company, Speedboat technology has helped drive an 87% reduction in the average length of stay from 8.39 days to 1.07 days. Over a one‐year period, costs were reduced from £8,800 per patient to £3,600 (a 59% reduction). 

Now, one thing holding the stock back is a lack of profitability. Creo is still loss-making, which adds risk to the investment case here. However, it expects to reach cash flow break-even in 2025, with profits following after.

If it can achieve this while still growing revenue by double-digits, then I think the share price can explode higher from this point. That’s 34p, as I write. 

Ben McPoland owns shares of Creo Medical. 

Eagle Eye Solutions Group

What it does: This tech company specialises in personalised digital marketing, offering a third-party-integrated platform.

By Oliver Rodzianko. Eagle Eye Solutions Group (LSE:EYE) seems to be offering advanced and personalised marketing solutions at just the right time. With artificial intelligence (AI) now being adopted by the mainstream, the desire for unique promotions will become the new standard. Eagle Eye is one of the firms leading in providing this.

One element that stands out to me regarding its financials is that it holds no typical debt and has only a moderate amount of other liabilities like accounts it owes. That lays the foundation for a solid investment, in my opinion.

It’s worth bearing in mind that Eagle Eye faces competition from some leading companies like Salesforce Marketing Cloud, Adobe Experience Cloud, and Cheetah Digital. It’s going to have quite a challenge on its hands in remaining competitive in AI with the bigger players. Nonetheless, Eagle Eye has still bagged customers like Asda, Pret, and Halfords so far.

Oliver Rodzianko owns shares in Salesforce.

Hostelworld

What it does: Hostelworld is a booking platform that focuses on hostels, in a large variety of tourist destinations worldwide.

By Christopher Ruane. If you try and book a hostel in most of Europe for this Summer, you’ll notice a few things. Availability is often tight – and prices are typically much higher than they were a few years ago.

Travel demand remains high, which is good for accommodation booking platforms in general. But the comparatively low cost nature of many of the sleeping options listed by Hostelworld (LSE:HSW) could mean that bookings stay strong even if an economic downturn hurts the higher end of the industry.

Revenues are soaring: Last year they increased 33% and surpassed pre-pandemic levels.

The company is profitable again after a few years of heavy losses. Net debt fell sharply last year to €12.3m.

The business model is simple and the low marginal cost of expansion is attractive. The pandemic era showed that a sudden slump in demand can see revenues collapse. But Hostelworld has bounced back and I think looks set for ongoing growth.

Christopher Ruane does not own shares in Hostelworld.

Porvair

What it does: Porvair makes specialist filtration equipment for aerospace, life sciences, and metal melt applications.

By Stephen Wright. With a market cap of £282m, Porvair (LSE:PRV) is the smallest company I own in my portfolio. But I rate its growth prospects extremely highly.

The company has a couple of different sources of growth. The first involves making more money in its existing operations and the second is through acquisitions.

Porvair operates in industries where competition is limited – or sometimes non-existent. That gives the company an ability to raise prices incrementally. 

There are also opportunities for growth by acquiring other companies. This can be risky, but Porvair’s size means it should have plenty of opportunities.

The company’s end markets are also cyclical, which is another risk. Aerospace turned down during the pandemic and healthcare inventories have been at elevated levels since.

Despite this, I bought the stock recently because I think it’s well worth the 17 times earnings the stock trades at. And I plan to continue doing so in the future.

Stephen Wright owns shares in Porvair.

Renold 

What it does: Renold is an international supplier of industrial chains and related power transmission products.

By Edward Sheldon, CFA. Right now, there are lots of small-cap stocks with explosive growth potential. However, one I want to highlight is chain and gear manufacturer Renold (LSE: RNO).  

There are several reasons I’m bullish on this stock. One is that it looks very undervalued at present. Currently, Renold has a price-to-earnings (P/E) ratio of just six. Considering that the company has a near-record order book, and that profits for the year ended 31 March 2024 are expected to rise 27%, that valuation strikes me as way too low.

Another is that around 40% of the company’s revenues come from the US. Given that the construction industry in the US is booming right now due to infrastructure spending, I think there’s potential for future results to be better than expected. 

Now, it’s worth pointing out that Renold has some debt on its balance sheet. This is not ideal in a high-interest-rate environment. 

At the current share price and valuation, however, I think the risk/reward setup looks quite attractive. 

Edward Sheldon has no position in Renold 

The post 5 small-cap stocks Fools think have explosive growth potential appeared first on The Twelfth Magpie.

One stock that looks interesting to me right now is Creo Medical (LSE: CREO), which is currently trading for just 35p. According to analysts at Deutsche Bank – who just slapped an 80p price target on it – it has the potential to rise 129% from here.

An innovative healthcare company

Creo Medical’s an innovative medical device company that specialises in instruments for endoscopic (minimally invasive) surgery.

Its flagship product, Speedboat Inject, is a multimodal endoscopic instrument that can be used by surgeons to dissect, cut out, inject, and more when operating on pre-cancer and cancer patients.

Recently, Creo has been having a lot of success with Speedboat Inject. In the first half of 2023, for example, the company saw a 44% increase in its user base from the end of 2022.

However, the group continues to launch new products to diversify its revenue stream. Last year, for instance, it launched Speedboat UltraSlim – a slimmer multi-modal endoscopic device with advanced features.

So far, this product’s been successful in procedures in the UK, USA, Latin America, and Asia to treat pre-cancerous lesions in the colon, oesophagus and stomach.

I can go whatever direction I want with complete rotation and deliver microwave faster. The UltraSlim is a gamechanger.

Feedback from a user of Creo’s Speedboat UltraSlim

Strong growth

Now Creo’s revenues are growing at a healthy rate right now, thanks to its innovative medical devices.

In February, the group announced that revenues for 2023 were likely to be up 13% year on year to £30.8m. This year, City analysts expect revenues to amount to £40.6m. That would equate to growth of 32%.

That’s the kind of numbers I like to see from a smaller company.

Hard to value

The problem from an investment perspective however, is that the company’s quite hard to value because it’s not yet profitable. With no earnings, we can’t get a price-to-earnings (P/E) ratio here.

We can look at the price-to-sales ratio though. Today, the company has a market-cap of about £126m. If it was to achieve the £40.6m sales figure I mentioned above, the price-to-sales ratio would only be 3.1. That’s quite reasonable to my mind, given the growth the company’s expected to generate.

Whether the stock can get to 80p in the medium term though is hard to know. This is likely to depend on revenue forecasts for 2025 and 2026, the outlook for profitability, and sentiment towards small-cap UK shares.

High risk, high reward

It’s worth pointing out that Creo Medical’s a higher-risk stock. There’s no guarantee its products will be successful in the long run. And without profits, the company’s share price is likely to be volatile.

Given the lack of profits, the stock’s a bit too risky for me right now. However, for those with a high tolerance for risk, the stock could be worth considering as a high-risk, high-reward play.

The post This 35p UK stock could rise 129%, according to a City broker appeared first on The Twelfth Magpie.