Hargreaves Lansdown investors are buying Polarean Imaging shares. Should I buy too?

Polarean Imaging Shares (LSE: POLX) have received attention from investors recently. Last week, for example, they were among the 10 most bought stocks Hargreaves Lansdownehis investment platform.

Should I follow the crowd and buy stocks for my own portfolio? Let’s look at the investment case.

Introduction to Polarean Imaging

Polarean is a US company working in the medical imaging research space. As an innovative company, we focus on solutions that help diagnose lung diseases.

Specializing in the use of hyperpolarized xenon gas (129Xe) as an imaging agent. The technology is designed to provide a new, non-invasive approach to diagnosis and enable MRI systems to achieve better imaging rates of lung function.

Founded in 2016, Polarean is listed in the London Stock Exchange’Alternative Investment Market (AIM) in 2018 through Initial Public Offering (IPO). Currently, it has a market cap of around £120m, meaning it is a small company.

The company is led by CEO Richard Hullihen, who has over 30 years of experience in the medical imaging industry.

Growth potential

Looking at Polarean Imaging today, there are a few things I’ve noticed. The first is that at the end of December, the company’s main product, XENOVIEW, was approved by the US Food and Drug Administration (FDA).

XENOVIEW is designed to be used as an MRI system for the evaluation of pulmonary ventilation in adults and pediatric patients 12 years of age or older. It can provide pulmonologists, surgeons and other respiratory specialists with a ventilation map of the patient’s lungs.

FDA approval is a huge achievement for the company. And it can lead to higher profits.

It’s worth noting that currently, the only broker covering the stock expects revenue to reach $9.8m in 2023 versus $1.5m in 2022. It is a substantial increase.

Answer: The second thing that stands out to me is that there are some big name investors on the board here. Currently, Amati Global Investors, Chelverton Asset Management (which has a good track record with UK growth stocks), and Aviva as some of the largest shareholders.

This is all very encouraging and leads me to believe that there is significant investment potential here.

A speculative growth stock

Having said that, this stock is speculative in nature. Polarean is not expected to turn a profit anytime soon. By 2023, the company is expected to lose $14.3 million. In general, unprofitable companies are risky investments. One reason for this is that it is difficult to accurately price.

Meanwhile, the company may need to raise capital at some point. Earlier in the year, the management said that the group has enough cash until 2024. So I wouldn’t rule out a capital increase in the not-too-distant future. This could put pressure on share prices.

The size of the company also increases the risk for the investment case. Usually, the stock price of a company of this size is volatile.

I’m moving now

Due to the lack of profitability, I will leave Polarean Imaging stock on my watch list. The company seems to have a lot going for it. However, for now, the stock is a bit speculative for me.