Premium content from Motley Fool Hidden Winners UK
Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.
“Best Buys Now” Pick #1:
Tristel (LSE:TSTL)
Why we like it: “Tristel (LSE: TSTL), is an innovative healthcare firm based in Cambridge. Its unique disinfectant products are high-margin, quick to deploy, and cost effective. The recent regulatory approval for its DUO ultrasound product in the US has seen it enter the world’s largest ultrasound market – a significant opportunity long in the making. Encouragingly, it has already onboarded a growing number of hospital customers in the US.“The company has also received regulatory approval in Canada for a high-level disinfectant for ultrasound probes, bolstering its North American growth prospects. We hope that Tristel can build on its recent progress and eventually take a position as global market leader. The opportunity for investors in the firm is that Tristel’s top-line growth accelerates and its profitability increases as royalties from the product rollout in North America come on stream.”
Why we like it now: In its latest financial year, Tristel has seen sales and earnings climb by 16% and 32%, respectively, while remaining highly cash generative. The company ended the year with cash and equivalents of £11.8m and it has no debt. The company is set to receive royalty income from the sale of its Tristel ULT and Tristel DUO products in the US – which should potentially be a major source of future sales and profit growth. Earlier in the year, it said its partner in the US, Parker Laboratories, was doubling its salesforce which should help kickstart growth. Parker reckons “momentum” is building despite encountering “more purchasing bureaucracy than originally anticipated.” The company appears to be growing into its valuation, and while the recent change in CEO might introduce risk, the firm expects to see further growth in the new financial year while the longer-run opportunity still looks significant.
