I’d ditch ReNeuron Group plc to buy another Neil Woodford favourite

This profitable growth company could serve you better than gambling with ReNeuron Group plc (LON: RENE).

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The share price of ReNeuron Group (LSE: RENE) continued its inexorable slide downwards this morning on release of the full-year results.

Financial results not pretty

The firm is a clinical-stage research company developing cell-based therapies. You have to scroll a long way down the results report — past descriptions of all the exciting research activities the firm is undertaking — before you get to the financial information.

When you get there, it’s not pretty. Revenues in the year were just £46k made up of royalties from non-therapeutic licensing activities. On top of that, the company received grant income of £0.85m. But that income is woefully short of what ReNeuron needs to keep its boffins employed with an honest income.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Escalating costs

Indeed, research and development costs increased to £16.65m from £10.27m the year before, and general and administrative expenses notched up a further £4.14m cost, up a tad from the previous year.

The bottom line is that ReNeuron increased its loss to £15.57m for the year, up from £11.35m the year before. One financial glimmer of light is that the firm still had around £53m in the bank on 31 March – and falling.

The company is notable in that the institution with the largest listed investment is Woodford Investment Management LLP. Neil Woodford and the other investors here must be hoping that ReNeuron can commercialise some of its creations before the cash runs out. If not, the firm will be back to the market for more money and the share price will continue its journey south.

Potential for spectacular outcomes

Of course, spectacular investing results can be achieved with new businesses like this. All we need is for ReNeuron to get one of its treatments through all the trial stages and it could be sitting on a hot property. Maybe a big pharmaceutical company will move in at that point and pay millions for the new product or even for the whole company, or ReNeuron could take the product to market on its own.

However, investing in ReNeuron now is a gamble because a lot could go wrong, such as how long the whole process may take, and whether an eventual finished product experiences the hoped-for demand from end users and clinicians.

Show me financial progress first

I would invest in an early-stage firm such as ReNeuron, but only after seeing evidence of an imminent change in financial fortunes, such as a major commercialisation announcement or evidence of revenues from trading and declining losses.

Instead of ReNeuron now, I’d rather invest in another Neil Woodford favourite, growing mid-cap specialist healthcare company BTG (LSE: BTG). The firm is making good progress with a number of medical treatments and has an impressive record growing its earnings each year. City analysts following the firm expect earnings per share to advance 28% for the current year to March 2018 and 15% next year.

Growth is very much still on the table and chief executive Louise Makin recently explained that double-digit product sales generating significant cash flows enable the firm to invest in product innovation, clinical data, geographic expansion and acquisition. It’s a virtuous self-funding circle that potentially leads to even more growth, and very different to the situation at ReNeuron where further funds may end up coming from investors before a commercial breakthrough happens.

Our analysis has uncovered an incredible value play!

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has recommended BTG. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

After collapsing 28% today, are Bunzl shares too cheap to ignore?

A poor trading statement has sent Bunzl shares to multi-year lows. Could now be a good time to consider investing…

Read more »

Investing Articles

These 5 stocks could earn £1,600 of annual passive income in a £20,000 ISA

Harvey Jones shows how to generate a high and rising passive income by buying a balanced mix of high-yielding FTSE…

Read more »

Young woman holding up three fingers
Investing Articles

3 things I like about Greggs shares

Greggs shares have tumbled by more than a third over the past year. But this writer has no plan to…

Read more »

artificial intelligence investing algorithms
Investing Articles

Nvidia stock: beware the bear market rally

Andrew Mackie argues that investors should tread carefully before investing in Nvidia stock, as the worst of the sell-off could…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Up 73% in one year, is this the best value stock in the FTSE 100?

A brilliant run of form suggests this FTSE 100 giant should no longer make the cut as a value stock.…

Read more »

Investing Articles

The best could yet be to come for UK shares! I’m buying these ones

Amid ongoing stock market turbulence, this writer's been adding selected UK shares to his portfolio. Here's why and what he…

Read more »

Top Stocks

4 UK stocks trading well below book value to consider buying

Sometimes, it pays to be contrarian: who says the UK market has priced a stock precisely right, anyway?

Read more »

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »