If you're not averse to investing at the small side of the market, then it could be worth checking out Aroa Biosurgery Ltd (ASX: ARX).
That's because analysts at Bell Potter believe the small cap ASX stock could rise materially from current levels.
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What is this small cap ASX stock?
Aroa Biosurgery is a soft-tissue regeneration company. It states that it is committed to "unlocking regenerative healing for everybody."
It develops, manufactures, sells, and distributes medical and surgical products to improve healing in complex wounds and soft tissue reconstruction. The small cap ASX stock's products are developed from a proprietary AROA ECM technology platform. It is a novel extracellular matrix biomaterial derived from ovine forestomach.
'A potentially transformational year'
Bell Potter believes that FY 2025 could be a transformational year for the company that could see its first profit and free cash flow. It said:
FY25 is a potentially transformational year for ARX with the likelihood of a maiden profit and positive free cash flows. We believe these have been the drivers of the resurgence in market value of the stock, spurned on by the positive revenue and earnings guidance provided at the recent full year update (for FY24).
Another positive is that there could soon be some clinical trial data available that the broker feels could be supportive of sales. It adds:
While the ARX products appear widely regarded and have been the subject of literally dozens of published articles, the absence of gold standard data from randomised clinical trials is a gap. Recruitment of clinical trials in the key area of lower limb salvage and large trauma wounds is problematic, however, to this end the company has recently completed enrolment of its Myriad Augmented Soft Tissue Regeneration Registry (MASTRR) with clinical data expected to commence in late FY25.
In addition, there's potential for another clinical trial to open up the company to a market with a US$1 billion opportunity. The broker said:
In addition, ARX will shortly complete recruitment of its 120 patient randomised study in diabetic foot ulcer (DFU) patients investigating the wound healing properties of its Symphony product with headline data due in 2H FY25. Data from a recent retrospective real world study is highly supportive of the wound healing properties of Myriad in severe DFU cases. A successful outcome (which we believe is likely) may unlock the market in outpatient wound care for DFU's where TAM is estimated at >US$1.0bn.
Big return potential
This morning, Bell Potter has reiterated its buy rating and 90 cents price target on the small cap ASX stock.
Based on its current share price of 60 cents, this implies potential upside of 50% for investors over the next 12 months.
Overall, this could make Aroa Biosurgery worth a closer look. Particularly if you're looking for some small cap exposure.
