1 ex-penny stock I’m loading up on while it is 34p

If we outline a penny inventory as an organization with a market cap beneath £100m and a share worth beneath £1, then Creo Medical (LSE: CREO) solely half qualifies. Its priced at 34p per share however its market cap is £125m.

Therefore my use of the time period ‘ex-penny inventory’ right here.

I first invested in Creo again in late 2022, however I’ve been shopping for extra shares these days. Right here’s why.

Novel medical gadgets

For these unfamiliar, the corporate develops progressive electrosurgical gadgets for minimally invasive surgical procedure, particularly within the subject of gastrointestinal endoscopy.

Now, that’s a whole lot of jargon! But it surely mainly means Creo makes devices used for surgical procedures carried out by small tubes with cameras (endoscopes) inserted into the digestive system.

The agency’s flagship product, Speedboat, is a flexible gadget. Connected to an endoscope, it permits medical doctors to take away or destroy pre-cancerous growths within the digestive tract.

Speedboat can dissect, resect, and coagulate (clot), eliminating the necessity for surgeons to regularly change devices.

Furthermore, it might ship each superior bipolar and microwave power, which presents benefits to sufferers over conventional strategies.

The gadget results in extra environment friendly procedures, fewer issues, and quicker affected person restoration instances.

Saving healthcare techniques cash

In April, the corporate launched knowledge that demonstrated substantial money financial savings from Speedboat for sure bowel procedures compared in opposition to comparable surgical alternate options.

From 130 such affected person procedures undertaken at East Kent College Hospitals Basis Belief, the information confirmed:

• an 87% discount within the common affected person size of keep from 8.39 days to 1.07 days
• 99% discount in important care prices
• 91% discount in lodging prices per affected person from £3,400 to £300

Over a one‐12 months interval, it stated prices have been diminished from £8,800 to £3,600. And the online money financial savings from simply these 130 affected person procedures was £687,000 for this single NHS Belief.

This case research can be shared with the Division of Well being and Social Care and monetary resolution makers at NHS Trusts for instance the affect that Creo’s Speedboat expertise can have.

I reckon there’s a great likelihood that the agency’s gadgets acquire important business traction throughout the NHS.

Scaling up

Now for the unhealthy bit. Creo is presently loss-making because it invests closely in its future development and market place.

Final 12 months, the agency is predicted to have misplaced round £17.5m on income of roughly £31m. That might signify top-line development of 13% 12 months on 12 months.

We’ll discover out on 15 Could when the corporate experiences its 2023 monetary outcomes. However losses are anticipated till at the least 2026, which provides threat.

The excellent news is that analysts presently count on income to speed up 30% in 2024 to round £40.9m. This can be as a consequence of extra surgeons around the globe being educated to make use of its suite of electrosurgical gadgets.

Final 12 months, the whole variety of Speedboat customers rose to 175, representing a 120% enhance. Extra customers means extra recurring income from the sale of the consumables wanted to function the gadgets.

Creo is presently buying and selling on a price-to-sales a number of of 4.3, which isn’t an outrageous valuation for a development inventory.

The agency’s merchandise are a win-win for each hospitals and sufferers. And I’m backing the inventory to be a winner for affected person long-term buyers too.