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Penny stocks are typically defined as having a market cap below £100m and a share price below £1. This can offer some attractive opportunities for growth investors, because smaller companies have the potential to rapidly increase in value if a catalyst sparks business growth. Here’s one that has been quiet recently but is starting to gain momentum.
Growth picking up pace
I’m talking about Creo Medical (LSE:CREO), with the stock flat over the past year. The company is loss-making and undoubtedly speculative, but operational progress over the year suggests the investment case could be reaching an interesting point.
Creo is a medical-device company specialising in minimally invasive surgical endoscopy, particularly for patients with pre-cancerous and cancerous conditions. Its Advanced Energy technology allows doctors to cut and dissect tissue using devices passed through an endoscope.
What excites me is that Creo increasingly looks like it’s moving from developing clever technology to actually commercialising it. Ultimately, this is really what an investor is looking for.
Revenue grew 50% in 2025 to £6m as clinical adoption increased. At the same time, management cut underlying operating costs by 20%, reducing the underlying operating loss by more than 40%. At this stage, I want sales to accelerate considerably faster than the cost base.
And momentum has continued. First-half 2026 revenue jumped 45% to £3.2m, while the underlying operating loss dropped by more than 25% to £4.9m. Management expects full-year revenue growth of 50%-60%, supported by a strong order book and expansion into markets such as Latin America.
Another potential catalyst
Creo’s Kamaptive programme allows its Advanced Energy technology to be integrated into third-party medical systems, including robotic-assisted surgical platforms. It has already reached an agreement supporting initial integration with a major global medtech partner. If licensing and partnerships allow Creo’s technology to reach substantially more procedures without the company having to build the distribution infrastructure, it could rapidly increase in scale and revenue.
Meanwhile, outsourcing manufacturing is helping Creo become a leaner operation. The company expects its underlying operating cost base to fall by around 15% versus 2025. Rapid revenue growth combined with falling costs could provide powerful operating leverage and move the business closer to profitability.
A pinch of salt
The stock’s flat performance over the past year shows investors are still waiting for the above to become a reality. Of course, this is firmly in high-risk territory. Creo is still losing money and had £7.4m of cash at the end of June. Further funding requirements could weigh on sentiment, especially if clinical adoption goes more slowly than expected.
Ultimately, if Creo can deliver 50%-60% revenue growth in the coming year and demonstrate higher adoption, I think investors could pile in. The penny stock is still risky, but investors who are happy with the risks could consider adding it to their portfolios.
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Jon Smith does not hold any positions in the companies mentioned.
This story originally appeared on Motley Fool
