A company insider just purchased 2,916,666 shares of this penny stock!

Creo Medical (LSE: CREO) has been a disappointing penny stock lately. It has fallen 57% in 2024 and is now trading at 19p. For context, it was heading for 215p in 2021.

A major issue for the medical device company lately has been the need to shore up its performance. balance financing growth opportunities. It recently raised £12m through the sale of shares at 24p.

I started buying this stock a while ago at around 42p, then doubled to 28p in the summer. So I’m in pretty good shape now.

But I see insiders accepting new share offers. I did not join them. But should I buy more at 7pm? Here are my thoughts.

skin in game

On 21 October Creo’s non-executive chairman Kevin Crofton bought 2,916,666 shares at a price of 24p each. This transaction cost approximately £700 thousand.

At the same time, finance director Richard Rees bought shares worth around £50,000.

It’s always good to see insiders buying shares. As a Wall Street legend Peter Lynch We once stated: “Insiders may sell shares for many reasons, but they buy them for only one: they think the price will rise.”

Of course, this does not mean that the share price will increase. It’s on a worrying downward trend.

What is Creo by the way?

For those who don’t know, the company develops minimally invasive electrosurgical devices. Powered by proprietary energy technology, the flagship Speedboat product combines radiofrequency cutting with microwave coagulation.

Simply put, this helps surgeons remove cancer and precancer from the lower gastrointestinal tract more effectively before it spreads. The company’s MicroBlate tool focuses on treatments for various cancers.

Based on data collected from more than 130 patients, Creo’s technology saved East Kent Hospitals University NHS Trust more than £5,000 per procedure performed. A 91% reduction in accommodation costs per patient was achieved.

Therefore, there is huge growth potential for the company as hospitals around the world (hopefully) adopt these cutting-edge devices. But this won’t happen overnight, as doctors need to be trained to use them.

growing pains

The firm recently published a disappointing set of interim results. Revenue of £15.2 million was down from £15.7 million the previous year, meaning zero growth. And underlying EBITDA Losses widened to £10.5 million from a loss of £9.2 million in the first half of 2023.

Creo initially estimated it would reach EBITDA breakeven by 2026, but that target has now been pushed back to 2028. Therefore, the company must continue to make losses for longer than originally planned, which is a significant risk here.

On the positive side, the company should be well capitalized after selling its 51% stake in its European business. Together with the share placement, this will generate around £40 million for the firm.

Management says this will create Creo”sufficiently well financed to achieve profitability“.

Will I buy more shares?

The company has exciting growth potential. MicroBlate technology is currently in the trial phase Intuitive SurgeryIon robot for lung cancer treatment. This combination will enable clinicians to diagnose and treat tumors with the same procedure.

However, I found the sudden lack of revenue growth in the first half a bit worrying. Consumable sales fell 6%. Until I am again confident about the growth trajectory, I will not increase my shares even at 19:00.