We asked our freelance writers to share their top views on Alternative Investment Market (AIM)-listed stocks with investors – here’s what they had to say in October!
[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 device company that makes instruments used in endoscopic surgery.
Written by Ben McPoland. I think stocks Creo Medical (LSE: CREO) looks interesting after falling 42% this year. A small cap company makes devices that enable minimally invasive surgical procedures.
Last year, it doubled its user base and analysts expect revenue to jump 28% this year to around £39.6m. Its recently launched Speedboat UltraSlim, a device that is compatible with many endoscopes, is expected to drive sales momentum in the coming years.
On September 18, Creo announced the sale of 51% of its European business to the Chinese Micro-Tech (a leading company for endoscopic instruments). If approved, this will give the company around €36.7m, which it will use to fund its growth.
Creo says this deal will do “Support our continued commercial growth in [Asia Pacific] region for product registration and branding in China.” Tapping into China’s huge healthcare market could be hugely profitable.
The biggest risk here is that the company is still in growth mode and not yet profitable. It has a cash flow break-even target of 2025, but the lack of income still increases risk.
However, with a market cap now of £95m (as I write), the stock looks attractive to me given its growth potential.
Ben McPoland is a shareholder of Creo Medical.
hVIVO
What it does: A professional contract research organization (CRO) specializing in human trials of vaccines and antiretrovirals.
Written by Mark David Hartley. hVIVO (LSE: HVO) is a healthcare research organization serving biopharma companies. It recruits volunteers for clinical trials through its FluCamp website, which boasts more than 320,000 participants. It can be risky business, as clinical trials face the threat of medical complications or even death. This may cause reputational and financial damage to the company.
The company’s latest results revealed a 30% year-over-year revenue increase and 67% EBITDA growth, which translates to a 24.5% margin. Basic adjusted earnings per share also rose 30%. However, with a price-to-sales (P/S) ratio of 3, earnings lag the price.
However, its balance sheet looks strong, with cash rising from £31.3m to £37.1m in H1. Looking ahead, management expects an 11% rise in full-year revenue on average revenue of £100m by at least 2028. That’s a compound annual growth rate of about 14%.
Mark David Hartley has no shares in hVIVO.
Serica Energy
What it does: Serica is one of the top 10 oil and gas producers in the UK North Sea, producing more than 40,000 barrels per day.
Written by Roland Head. Shares in North Sea oil and gas producers were boosted by falling oil prices and uncertainty over government energy policy. Serica Energy (LSE: SQZ) is not.
The company’s share price is down 40% so far this year. Shares now trade at just three times earnings, with a dividend yield of 18%.
The autumn budget on 30 October would provide some welcome clarity. Currently, we know that Serica had $131 million in cash at the end of June.
Serica’s projections suggest the company could generate an additional $500 million in revenue from its current product by the end of 2027.
What worries me the most is that the management may waste a lot of the club’s money through inappropriate purchases.
However, the company has recently confirmed that it will support the dividend, announcing an unchanged interim payment. I think the shares look very cheap right now.
Roland Head is a shareholder in Serica Energy.
Warpaint
What it does: Warpaint sells color cosmetics under its brands, W7 again Technology. It sells through major retailers and through its website.
Written by Harshil Patel. Warpaint (LSE:W7L) is going from strength to strength. Not only do sales and profits increase, but profit margins also increase.
Achieving this hat-trick is amazing and is what makes this AIM stock stand out from the crowd.
Its half-year pre-tax profit jumped 76% from £6.2m to £10.9m. The company’s sales were measured in the second half of the year due to its gifts. So, I can expect more growth to come.
There are many opportunities, from existing retailers as well as new supermarkets that are currently being discussed.
Warpaint offers many of the qualities that I look for in the best sharing. Namely, it offers a return on capital of 42%, over 20% operating margin and a strong balance sheet.
There is competition in this area, but it seems to be taking market share from its rivals.
I wrote about this Aim stock last year, and even though its price has doubled since then, I still like it today.
Harshil Patel is a shareholder of Warpaint.
YouGov
What it does: YouGov is a British internet-based market research and data analytics firm that operates globally.
Written by Muhammad Cheema. YouGov’s (LSE:YOU) 2024 is a very bad year with shares down almost 62%. Investors were spooked by a profit warning in June, which caused a one-day drop of 46%. The £214m debt on its balance sheet is dangerous and not allaying concerns.
However, I believe this is driven in the opposite direction. In its latest trading update on 6 August, it guided for revenue of £327-330m and an operating profit of £43-46m. For context, FY23 revenue and operating profit were £258m and £44m, respectively.
This does not warrant a bearish share price in my opinion and presents a potential buying opportunity for investors to consider. Revenue growth remains strong and although earnings are broadly in line with last year, historically the company has a strong track record of growth. This could be a mistake in practice, especially since the company is well positioned to capitalize on the rise of AI.
Muhammad Cheema has no shares in YouGov.
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