Should I pile into Versarien plc, up 30% today?
Lossmaking Versarien(LSE: VRS), the advanced materials engineering company, took another step closer to profitability today with the announcement of an agreement with a US global chemicals supplier. The market likes the news and the stock is up more than 3o% as I write.
Working with the big guns
Its new partner is big, appearing in the Fortune 100 list of the largest public and privately held companies in the US by gross revenue figures. Although today's announcement doesn't reveal its name, this giant organisation plans to use Versarien's proprietary Nanene few-layer graphene nano-platelets, along with other of the firm's 2D products, in various potential applications.
No wonder there's excitement in the air. Something meaningful could result from this tie-up capable of propelling Versarien into the ranks of profitable firms with growing earnings. Now that an agreement has been signed, the new partners will work together on research, development and testing of compounded materials, with the objective of "replacing incumbent additives across different chemical variants to improve material performance."
The goal is to initially evaluate and process samples for speciality packaging applications and barrier technology, but working together will also allow both parties to better understand opportunities for further agreements and collaboration on other projects.
Chief executive Neill Ricketts reckons that this agreement with what he describes as "one of the world's largest chemical and specialist material groups" adds more weight to the assertion that Versarien is becoming "the go-to supplier of high quality graphene and other potentially industry disruptive 2D materials." He puts this success down to the firm's high-quality product and research capabilities linked with Manchester and Cambridge universities, which he says amounts to a strong competitive position putting the company at the forefront of commercialising graphene.
Maybe this agreement is one of several to come. Mr Ricketts says other potential agreements with similar market-leading companies are in the pipeline and he is looking forward to updating the market further in due course "during this exciting time for Versarien." Judging by the reaction of the share price today, I reckon those holding the shares could be in for an exciting time ahead too.
The company reckons all its product offerings have the potential to change the game in several industry sectors, but progress in commercialising the production of graphene stands out as the main driver towards profits so far. The firm has moved graphene production out of the laboratory and into a scalable production facility in Cheltenham and looks like it is preparing for growth. I think deals like that announced today bolster the case for considering an investment in the firm. If the company does succeed in disrupting industries with new technology, we could see rapid progress on earnings from here.
Revenue grew by more than 100% over the past four years and in 2017 we've seen rapid strategic progress. Two fundraising events during the year raised just under a gross £4.4m for the firm's coffers and today's announcement is the latest in a string of deals signed during the year. Versarien looks like it could be on the cusp of transforming its finances and I think that 'right now' could be a good time to research the firm.
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Kevin Godbold has no position in any of the firms mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.