Shares that trade under $1 a piece are often considered too risky or speculative for some investors but this shouldn’t really be a determining factor when considering a company’s underlying fundamentals.
While it’s true that many shares trading at low share prices can be speculative, there are also quite a number of interesting and fast growing companies that trade at relatively lower share prices that can offer the potential for quite healthy returns.
Bell Potter has identified a number of these potential winners and three are outlined below:
Paragon Care Ltd. (ASX: PGC)
Paragon Care is a specialist medical equipment supplier to hospitals, medical centres and aged care facilities. The company has two major divisions being capital equipment and consumables. Importantly, the consumables division is a source of stable and recurring revenues and now accounts for around 70% of total sales. Paragon Care has undertaken a number of significant acquisitions recently and these are performing to expectations. The shares are currently trading at 67 cents a share and Bell Potter has a 12-month price target of 80 cents. This seems like a reasonable target as the broker estimates earnings per share to grow in FY16 and FY17 by 45% and 24%, respectively.
Viralytics Ltd. (ASX: VLA)
Viralytics is a highly speculative biotechnology company that is developing novel cancer treatments. The technology is very complicated, but essentially involves the use of a virus which targets specific cancer cells causing them to be destroyed. This is presented graphically below.
Its lead product, known as CAVATAK, is still in the development phase but has shown promising signs in early clinical trials. Viralytics is still a long way from commercialising its technology but is well funded with over $46 million in cash. The shares are currently trading at 77 cents per share but Bell Potter has a 12-month price target of $1.23.
Onevue Holdings Ltd (ASX: OVH)
Onevue is an up-and-coming ‘fintech’ company that operates in the highly lucrative superannuation sector. The company provides platform and fund services to both retail superfunds and self-managed superfunds (SMSFs). Onvevue believes the interaction of its platform and fund services can create an ‘ecosystem’ to provide it with a competitive advantage over other players in the sector. Investors should note, however, that the company is not yet profitable as it currently lacks sufficient scale and is still investing in its own technology. Despite this, Bell Potter is forecasting profits to double from $4 million in FY17 to $8.6 million in FY18. The shares are currently trading at 71.5 cents but the broker has a 12-month price target of 90 cents.
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As of 2.11.2020
Motley Fool contributor Christopher Georges owns shares of Paragon Care. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.