One penny stock I’ve found myself drawn to recently is Agronomics (LSE: ANIC).

I reckon there’s some potential for the firm to capitalise by changing the ways of one of my favourite pastimes, cooking and eating!

Let’s take a look at the investment case, and explain how this small-cap could be onto something potentially lucrative.

Investing in food production alternatives

Agronomics is set up as an investment firm, and specialises in the food production industry. It looks to help smaller firms that are focused on producing environmentally friendly alternatives to some of the world’s favourite foodstuffs.

As small-cap stocks are prone to more volatility, it’s not a surprise to see the share price drop by 46% over a 12-month period. At this time last year, the shares were trading for 13p, compared to current levels of 7p.

Exciting potential and notable risks

Agronomics investments focus on firms specifically in the nascent cellular agriculture industry. To break that down in simpler terms, these are businesses that look to create meat and poultry from animal cells, rather than animal slaughter.

There is some exciting potential for growth, if you ask me. Firstly, the meat and poultry market is worth over $1trn. Next, the rising population in the world, and decreasing animal population, means we need to start thinking about how we’ll feed ourselves for generations to come.

Furthermore, the US Department for Agriculture (USDA) has recently provided two firms permission to sell lab-grown poultry. This could be the start of this type of food production and consumption really taking off.

In addition to these developments, Agronomics has some knowledgeable people on board its journey. A prime example of this is Richard Reed – a non-executive director – who founded Innocent Drinks. The business was eventually snapped up by drinks giant Coca-Cola for £320m. Start-ups with individuals who possess relevant experience and know-how excite me.

From a bearish view, one of the biggest issues Agronomics and the firms it invests in are facing is huge manufacturing costs. At the early stages like now, this could hurt its balance sheet. I do envision this could change in the future, as tech develops and practices become the norm. High manufacturing costs aren’t uncommon for a new product in its infancy.

The other big issue for me is whether the cell-based alternatives will prove as popular as the traditional product .Can the taste be replicated to make these products mainstream? Time will tell as to how popular these alternatives could be.

My verdict

I think there’s a potentially huge growth market that Agronomics could earn a bucket load of cash from. This could send the shares sky high. The rising sentiment against animal cruelty and moving away from consumption of products linked to it could help Agronomics.

Despite the risks that could dampen performance and returns – at least to start with – there’s still enough meat on the bones for me. I’d be willing to buy some shares for my holdings when I’m next able to. At just 7p per share, I don’t see too much risk for me personally.