1 AIM penny stock I’d buy and hold till the 2030s!

Investing in penny stocks is not for risk. They are often sensitive to market news and have little liquidity. This means that it can be very volatile, with sudden movements one way or another. On the other hand, finding the right penny stocks can be a very rewarding activity.

Here’s how I think this small-cap company has potential at 27p.

Volatile stocks

I think it’s medical (LSE: CREO) shows volatility. After going public at 77p in 2016, the stock went on to double within two years. Then it went up and down for three years, before it plunged all the way down to 18p. Now the shares are at 27p, having rocketed 42% in the past month.

The stock has lost more than 80% of its value by 2022. The reason is fear of the company’s dwindling cash reserves. However, last month the company announced that an oversubscribed fundraiser had raised £28.5m. And there is the potential for an additional £5.2m from the share opening offer.

Craig Gulliford, CEO of Creo, said: “This round of funding will not only provide working capital to accelerate our core technology, but will also close the funding gap to pave the way to cash flow breakeven and, ultimately, profitability..”

This injection of new capital into the business has now removed liquidity concerns. Investors can instead focus on market opportunities ahead, which I believe are substantial.

Advanced technology

The company has developed a minimally-invasive electrosurgical device. All six products are CE marked and five are also cleared for use in the US.

Their flagship product is called Speedboat. This device can be attached to an endoscope to cut or vaporize pre-cancerous growths in the digestive tract before they spread. Endoscopes are usually used to investigate rather than perform treatment, so this innovation benefits patients and ultimately saves the health system money.

Creo devices are powered by an advanced energy platform called CROMA. Importantly, the company has since licensed this patented technology to other companies, including global robotics giants Intuitive surgery. The company has already received its first revenue from this non-exclusive licensing deal (around £1.4m), and expects additional milestone payments, as well as increased device sales revenue.

This intellectual property deal with Intuitive is a huge boost to Creo’s technology, and the company expects to announce more such licensing deals in the future.

Savings

Analysts expect the company to post £27m in sales for fiscal 2022. In fact, there will be nothing in fiscal 2019, when the device will start making a profit. But the company is still at a loss, and the risk remains. At the very least, it will need to increase sales next year to justify its current £56m market cap.

However, the price-to-sales ratio (P/S) of the two stocks does not look very demanding. And with cash no longer an issue, most analysts believe the company has a clear path to becoming cash-generative by 2025.

Overall, I believe the stock has great long-term potential. That’s why I just uploaded the ownership.