The best AIM stocks to consider in October

We asked our freelance writers to share their best ideas for stocks listed on the Alternative Investment Market (AIM) with investors – here’s what they said for October!

(Just starting your investing journey? Check out our guide on how to start investing in the UK.)

Creo Medical

What it does: Creo Medical is a manufacturer of medical devices, producing instruments used in endoscopic surgery.

Author: Ben McPoland. I think stocks Creo Medical (LSE: CREO) look interesting after falling 42% this year. An innovative small-capitalization company produces devices enabling minimally invasive surgical procedures.

Its user base has more than doubled in the past year, and analysts expect revenue to increase by 28% this year to around £39.6m. The recently launched Speedboat UltraSlim, a device compatible with most endoscopes, is expected to drive further sales growth in the coming years.

On September 18, Creo announced the sale of 51% of its European business to China Micro-Tech (leading manufacturer of endoscopic instruments). If approved, it will bring the company a profit of approximately EUR 36.7 million, which it will use to finance its development.

Creo says this deal will do that “to support our continued commercial development in the region (Asia Pacific) through product registration and joint branding in China.” Opening up opportunities in China’s vast healthcare market could prove highly lucrative.

The main danger is that the company is still in the growth phase and is not yet profitable. It has a 2025 cash flow breakeven target, but the lack of earnings continues to increase risk.

However, with a market capitalization currently standing at £95m (at the time of writing), I find the shares attractive given the growth potential.

Ben McPoland owns shares in Creo Medical.

hVIVO

What it does: A specialist contract research organization (CRO) focused on human medical trials of vaccines and antivirals.

Author: Mark David Hartley. hVIVO (LSE: HVO) is a clinical research organization serving biopharmaceutical companies. It recruits volunteers for clinical trials through its FluCamp database, which includes more than 320,000 participants. This can be a risky endeavor because clinical trials carry the risk of medical complications and even fatalities. This may cause image and financial damage to the company.

The company’s latest results showed a 30% year-on-year increase in revenues and a 67% increase in EBITDA, which translates into a margin of 24.5%. Basic adjusted earnings per share also posted a 30% increase. However, with a price-to-sales (P/S) ratio of 3, revenues are lower than the share price.

Despite this, the company’s balance sheet looks solid, with cash rising from £31.3m to £37.1m in the first half of the year. Looking ahead, management is forecasting 11% revenue growth for the full year, with forecasts for revenue of at least £100m by 2028. This represents a compound annual growth rate of approximately 14%.

Mark David Hartley does not own hVIVO shares.

Seric energy

What it does: Serica is one of the top 10 largest North Sea oil and gas producers in the UK, producing over 40,000 barrels a day.

Author: Roland Head. Shares of North Sea oil and gas producers fell on falling oil prices and uncertainty over the government’s energy policy. Seric energy (LSE:SQZ) is no exception.

This year, the company’s share price has already fallen by 40%. The stock is currently trading at just three times projected earnings and a dividend yield of 18%.

The Autumn Budget on 30 October may provide some welcome clarity. Meanwhile, we know that at the end of June, Serica had USD 131 million in net cash.

Serica’s forecasts suggest the company could generate another $500 million in excess cash from current production by the end of 2027.

My biggest concern is that management may lose some of the group’s cash as a result of a foreign takeover gone wrong.

Recently, however, the company confirmed its support for the dividend, declaring partial payment of the dividend at an unchanged level. I think the stock just looks too cheap right now.

Roland Head owns shares in Serica Energy.

War painting

What it does: Warpaint sells color cosmetics under its own brands, W7 AND Technician. It sells through major retailers and through its own website.

Harshil Patel. War painting (LSE:W7L) is growing stronger. Not only sales and profits increase, but also the profit margin.

Scoring this hat-trick is impressive and that’s what makes AIM stock stand out from the crowd.

Half-year profit before tax increased by 76% from £6.2 million to £10.9 million. The company’s sales are included in the second half of the year due to its gifting characteristics. So I would expect more growth.

There are many opportunities, both from existing retailers and new large stores that are currently in talks.

Warpaint offers many of the features I look for in top stocks. Namely, it offers a return on capital employed of 42%, an operating margin of over 20% and a solid balance sheet.

There is competition in this market, but it appears to be taking market share away from rivals.

I wrote about Aima shares a year ago, and although their share price has doubled since then, I still like them.

Harshil Patel owns shares in Warpaint.

YouGov

What it does: YouGov is a British market research and internet data analytics company with operations worldwide.

Author: Muhammad Cheema. YouGov (LSE:YOU) It’s been a hot year in 2024, with shares down almost 62%. Investors were particularly spooked by the June profit warning, which resulted in a one-day decline of 46%. The £214m balance sheet debt is also risky and does not alleviate concerns.

However, I think it has been blown out of proportion. In a subsequent trading update on August 6, it forecast revenues of £327m-330m and operating profit of £43m-46m. For context, revenue and operating profit for FY23 were £258m and £44m respectively.

This does not justify the decline in the share price in my opinion and is a potential buying opportunity that investors should consider. Revenue growth remains strong, and while earnings are broadly comparable to last year’s levels, historically the company has a strong track record of growing earnings. This could simply be a sharp decline in performance, especially since the company is perfectly positioned to take advantage of AI developments.

Muhammad Cheema does not own YouGov shares.