Penny shares may be interesting investments due to their low share costs and potential for prime returns. Nonetheless, investing in these speculative small-cap shares carries larger threat than shopping for equities listed on the FTSE 100 or FTSE 250 indexes.

Volatility is a key concern. Buyers contemplating these high-risk funding propositions want the abdomen to endure huge share price actions in pursuit of portfolio good points. Briefly, they’re not for the faint-hearted.

One firm that’s no stranger to volatility is Creo Medical (LSE:CREO). This AIM-listed healthcare machine enterprise specialises in minimally invasive surgical endoscopy. Trading at a 52-week low after a protracted dropping streak, is in the present day the right time to purchase this beaten-down penny inventory?

A falling share price

Creo Medical has seen its market cap evaporate lately as its share price has taken a battering. In the present day, the inventory market minnow’s valued for lower than £52m.

There are some worrying indicators on this penny inventory for potential buyers to observe intently. The agency’s FY24 revenues failed to fulfill market expectations. The group complete of £30.4m represented a 1.3% decline in comparison with the prior 12 months’s determine of £30.8m. Frankly, it’s regarding to see the corporate going into reverse gear on such an important metric.

Creo Medical has additionally but to show a revenue. The board expects FY25 will likely be one other loss-making 12 months. I’m anxious extra cash will must be raised earlier than the enterprise turns into a worthwhile enterprise, which might not be straightforward on condition that it has traditionally skilled fundraising difficulties.

That stated, in February, the corporate secured £25m in internet inflows from divesting a majority stake in its European consumables enterprise to a Chinese language medical machine producer. Coupled with a £12.1m fairness elevate final 12 months, Creo Medical has some monetary headroom for the close to future at the very least.

Restoration potential

On the intense facet, this month marked the business launch of a brand new product — the SpydrBlade Flex — within the UK and EU. This might present a much-needed enhance for the corporate’s backside line. The multi-modal endoscopic machine has promising purposes for minimally invasive therapy of colorectal most cancers.

As well as, the potential of Creo Medical’s core providing can’t be understated. Its flagship Speedboat product suite makes use of outstanding expertise. These tiny surgical devices provide surgeons a one-stop store to hold out incision, dissection, and coagulation procedures while not having to vary gadgets.

The market alternative is appreciable. Some analysts consider the gastrointestinal endoscopic applied sciences market could possibly be price between £2.32bn and £2.48bn. If Creo Medical can efficiently realise the business potential of its merchandise, the shares might in the end show to be a profitable funding at this early stage.

A penny inventory to contemplate?

Like all penny shares, Creo Medical faces vital dangers. The truth that the shares have been as soon as altering fingers for practically £2.30, in comparison with 12.5p in the present day, proves as a lot.

Nonetheless, the corporate’s threat/reward profile appears enticing to me proper now at this low valuation. Enchancment will likely be wanted throughout a variety of core monetary yardsticks, however the agency’s distinctive patented applied sciences present vital promise.

So, is Creo Medical a discount inventory? Fairly probably! Discount of the 12 months? That’s most likely a stretch. However for buyers with adequate threat appetites, I feel this penny share deserves consideration.