Is this FTSE AIM stock primed for growth in 2022?

January 25, 2022

I want to know which current FTSE AIM small-cap stocks could be primed for growth in 2022 and beyond. One stock I want to take a closer look at for my holdings is Diaceutics (LSE:DXRX).

Precision medicine business

Diaceutics offers pharma firms precision medicine diagnostic solutions. It is worth noting that precision medicine is a newer medical model. It proposes the customisation of medical care, decisions, treatments, practises, or products being tailored to a group of patients. This is instead of a one drug fits all methodology which is currently the norm within pharma and healthcare.

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As I write, Diaceutics shares are trading for 110p. At this time last year, the shares were trading for 146p, which equates to a 24% drop over a 12-month period.

For and against investing

FOR: Diaceutics is a relatively new business in a relatively new sub-sector of pharma and healthcare. The pandemic has reminded us all of the importance of life-saving drugs and the growth potential in this sector. It is said that precision medicine is set to grow exponentially in the years ahead. Investing in this FTSE AIM incumbent now could be a stroke of genius while it is cheap, up and coming.

AGAINST: Pharma is a large and lucrative sector. One of the biggest risks I must note is that of competition. Despite Diaceutics’ progress to date, there is always the chance that a bigger, more established firm provides their own solutions. An established competitor will have more financial muscle to develop precision medicine tools and could leverage existing relationships to launch it successfully.

FOR: With newer smaller firms, such as Diaceutics, I often have to refer to track record of performance and the recent news cycle when deciding to buy the shares for my holdings. I do understand that past performance is not a guarantee of the future, however. Reviewing past performance, I can see revenue and operating profit increased year on year between 2017 and 2019. 2020 pandemic figures were slightly less on both fronts. More recently, Diaceutics released a trading update ahead of 2021 results. It has seen reported revenue grew by 10% compared to 2022 and uptake of its most popular platform had increased too.

AGAINST: Precision medicine is still a new concept in the pharma and healthcare market. There is always the chance that the solutions and methodology to support its uptake could fail, meaning the platforms created by Diaceutics could become useless or obsolete. This could impact the stock massively unless it was able to change tack to another part of pharmaceuticals.

FTSE stock I would buy

There aren’t many investors out there who can profess the ability to pick a small-cap gem that could develop into the next big thing. I do not profess to have such ability, but I do like the look of Diaceutics. It has a decent track record of growth and performance and larger scale pharma firms are taking notice of its groundbreaking work. I would happily add a small number of shares, which I currently consider relatively cheap, to my holdings and see what happens.

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Jabran Khan 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.

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