Is This Quality Small-Cap Growth Stock on Your Radar?

Biosyent Inc. (TSXV:RX) is a great little stock — if you buy at the right price!

| More on:

Get started today reminder note

Generally, it’s probably a good idea for new investors to avoid individual small-cap stocks, because they’re typically riskier than mid caps and large caps. However, if you invest in the right ones, they can be amazing return boosters in your portfolio.

Biosyent Inc. (TSXV:RX) is a small-cap stock that investors should seriously consider when it dips meaningfully. I’ll explain later in the article what would be considered a meaningful dip for the stock. Before that, let’s take a look at what the business does.

A business overview of Biosyent

Biosyent is a specialty pharmaceutical company, which sources, acquires or in-licenses innovative pharmaceutical products that are proven safe and effective to improve the lives of patients, and it sells them in Canada and internationally. Biosyent is focused on growing its portfolio while maintaining profitability.

Young girl on a beach

Recent business performance

Biosyent’s three-year revenue growth rate and net income after tax growth rate are 19% and 18%, respectively, ending in 2017. Most importantly, the company has a track record of high returns on equity (ROE) and returns on assets (ROA) since 2011.

Last year, Biosyent achieved an ROE and ROA of ~26.7% and ~23.5%, respectively. As well, it generated revenue of ~$20.8 million, net income after tax of ~$5.2 million, and nearly $5.6 million of cash. Not surprisingly, it increased its diluted earnings per share by 20%, as the company’s last equity offering was in 2002; it has been reinvesting into the business the cash that it has generated from its operations.

The portfolio

Currently, Biosyent has eight marketed products, including FeraMAX, which helps prevent and treat iron deficiency, and the Aguettant System® for pre-filled syringes, which “offers a patented innovation that can be used for a variety of injectable medications in hospitals and the acute care setting … [Aguettant] has been available since 2009 and is used in several European countries including France, Belgium, and the United Kingdom,” as described on the company website.

Going forward

Management forecasts the company has the ability to grow at a rate of ~20% in the long run. It already has some products with +$25 million in peak penetration expected to launch in 2019 or 2020.

When should you buy Biosyent?

Biosyent stock is known for pulling back meaningfully occasionally. For example, between August 2016 and February 2017, the stock retreated ~17% from peak to trough. Then again, between October 2017 and February 2018, the stock declined ~18% from peak to trough. So, when the stock retreats +15%, it’ll be a good time to review and consider the stock.

Investor takeaway

Biosyent is a great, little stock, which has a track record of profitability under the leadership of quality management. Interested investors can start a position in the stock now, as it trades at a reasonable forward multiple of ~25.4 at the recent quotation of $10.05 per share. If you’re looking for a safer entry point, consider the stock on a +15% dip.

If you’re uncomfortable with buying individual small-cap stocks but want to get above-average growth from small-cap stocks, consider small-cap exchange-traded funds, such as iShares Russell 2000 ETF (NYSEARCA:IWM) and iShares S&P SmallCap 600 Index (NYSEARCA:IJR) on meaningful dips.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of Biosyent. Biosyent is a recommendation of Hidden Gems Canada.

More on Investing

Airport and plane

Air Canada – Its Moment Has Come

Air Canada stock got beaten down last year, but today, its prospects are better.

Read more »

Man data analyze

Here’s the Next TSX Stock I’m Going to Buy

BRP Inc. (TSX:DOO) is a TSX stock I’m looking to snatch up, as the Powersports industry rebounds after the COVID-19…

Read more »

Dividend Stocks

TFSA: How to Invest $88,000 to Get $5,450/Year in Passive Income

Top TSX dividend stocks such as Enbridge can be held in your TFSA to benefit from steady payouts and capital…

Read more »

Arrow descending on a graph

3 Stocks to Add to Your Portfolio in a Market Pullback

The stock market is in the green, but the upcoming U.S. Fed meeting raises fears of a pullback. Use that…

Read more »

Tech Stocks

Your Future Self Will Thank You for Buying Lightspeed Stock in 2023

Here’s why you may want to add LSPD stock to your portfolio in 2023 to hold it for the long…

Read more »

grow money, wealth build
Bank Stocks

TFSA Investors: A Big Bank Stock That Pays Almost 6% in Dividend Income

A Big Bank stock is an ideal core holding in a TFSA, not only for its financial stability but also…

Read more »

a person watches a downward arrow crash through the floor
Tech Stocks

Don’t Wait for a Market Crash: These 2 Top Stocks Are on Sale

Waiting for a market crash can take away the opportunity to buy early in the market rally while growth stocks…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

Have $500? 2 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

Got $500 to invest? Consider buying these stocks that are too cheap to ignore.

Read more »