Synthomer‘s (LSE:SYNT) a growth stock that’s absolutely exploded. In the last three months alone, the share price is up a gargantuan 521.5%. And that means anyone who put £5,000 to work at the start of March is now sitting on roughly £31,075!
What on earth just happened?
From collapse to comeback
The strange thing is that this is a relatively new growth story. Synthomer’s shares have been in a brutal downtrend since 2021, and even after the recent surge, the stock’s still down roughly 97% below its previous peak.
In other words, even after rising by more than 500%, the company still has a long way to go before it makes a complete recovery. But that also means there could be ample growth left on the horizon.
So let’s dig a little deeper.
The original collapse came from a nasty mix of a poorly-timed acquisition, weak demand, high debt, and pressure across its end markets. Revenue came under strain, earnings were squeezed, and investors lost patience as the business struggled to convert its speciality chemical strategy into reliable growth.
Has that now changed?
Why the share price just skyrocketed
There are a lot of factors at play here. But the primary catalyst for this sudden surge appears to be the group’s latest full-year results. The headline numbers were hardly anything to get excited about. Revenue still slipped by 10% from £1,933.1m to £1,739.2m, while underlying operating profits stumbled 21.8%, falling to just £37.6m.
Free cash flow was more positive, flipping from an outflow of £54.7m in 2024 to an inflow of 26.6m. That’s a positive sign, but none of these figures scream 500%+ rally. So what’s happened?
The big news is that management’s sucessfully refinanced its substantial debt burden, pushing back its debt cliff to 2029. Considering there were fears that Synthomer’s outstanding debts could sink the entire business, this is a major positive milestone that’s put to rest any immediate fears of imminent bankruptcy.
With that in mind, it’s no surprise to see this business suddenly start skyrocketing and investor sentiment shift from doomish gloom to genuine hope.
But can this relief rally continue? Or is this just a temporary surge?
Hype or turning point?
This is where the story gets interesting for growth stock investors. The rally was clearly triggered by relief that refinancing risk has eased. Yet the latest numbers also suggest something more durable may be taking shape.
Positive cash flow, better EBITDA margins, and a more focused portfolio are all the sort of signs investors want to see in a genuine turnaround. And that message was echoed by CEO Michael Willome:
“In the face of the volatile market conditions across the sector, we have rigorously prioritised what is within our control, delivering robust cash, earnings and margin performance while continuing to focus, simplify and strengthen our business in accordance with our strategy.”
So should I now be considering this growth stock for my portfolio?
Synthomer’s starting to show some long-awaited green shoots. But as previously mentioned, there’s still a long road ahead. And demand for its products remains patchy. If the firm continues to struggle to reduce debt between now and 2029, this most recent rally could prove to be short-lived.
That’s why for now, I’m keeping Synthomer on my watchlist. But if the company can stabilise and improve its revenue and earnings, it might be time to take another look.
Should you invest £5,000 in Synthomer Plc right now?
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Zaven Boyrazian does not hold any positions in the companies mentioned.
