The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Therefore I think orders are the issue. I guess an alternative is that they have produced tests at full capacity for the NHS contract but that extra order is yet to be announced, so they are sitting on unsold stock.
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Inventory should be around 93mE (net profit minus free cash flow), roughly in line with broker estimates. So nothing special there either.
I don't think the orders are the issue, they fired on all cylinders, it is just that the PI's expectations were too high. I think we were wrongfooted by the production capacity.
Anyway, before comparing the market cap to the sales number as some are doing here to de-ramp the stock, one should first subtract the cash (100 million Euro) and the inventory (= cash temporarily stored in product; more or less 90m Euro). That leaves a Mcap of 660m Euro. We currently have sales of 311mEuro. That gives a P/S of 2.12. Suppose revenue falls back to 126mEuro in 2022 (as SP Angel currently predicts), that would bring the P/S to 5.23. Suppose the current net profit margin of 62.65% falls back to 50% (as SP Angel predicts), the P/E would only be 10.46 at the current share price. It seems to me there is very little downside and still plenty of upside for the stock, considering the peer group is valued at an average P/E of 33.
Hi all.
Well, I was way off at £416m. My figures were based on the declared 10m pm production capacity and 78% efficiency at the factory and assumed pricing of £8 per test.
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I always thought most PIs were being overly optimistic concerning sales. My sales estimate was between 250 and 300mEuro. However, that meant there was a large discrepancy with the production capacity which I never could figure out.
Stock should be up 40% at open?
That must be the most misguided post I have ever read on LSE.
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If you would have taken the trouble of calculating the fair value of the stock, you would not utter such stupid remarks.
Great set of figures.
Revenue came in at 40% above market expectations (market expectations being the rev number backed into the share price, not to be confused with the estimates of some board members).
Stock should be up at least 40% at open.
Moreover I expect the brokers to up their targets considerably over the coming days, because they will most likely upgrade their revenue expectations for 2021.
Finally, the phase 2 extension of the DHSC contract is still very much on the table.
Nothing but good news. Well done, Nova!
Still hard at work to compile all the data, it seems. Before the end of the month could also mean tomorrow or sunday, I suppose?
Porky, I do not agree anything below the broker targets is going to disappoint. Do not forget the current share price is still 33% below the average of their two targets!
So the market appears to be factoring in 197m£ or 222mEuro of revenue for 2020 (being 33% below the average of the two broker 2020 revenue estimates).
I was wondering, once the RNS is out, when we would get analyst note updates?
I suppose nobody knows the answer, but it is a serious question because if the results are good, the broker reports might provide an additional and delayed boost to the stock price. For those thinking of pulling the trigger early, they'd better think twice.
Abbott
They sold 100 million covid tests in the first three quarters of 2020.
In Q4 alone however, they sold 300 million covid tests.
Testing for the pandemic only began to ramp up significantly in Q4 2020.
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This therefore suggests that my 4th Qtr projections are very achievable
Therefore €489m, may be archived for 2020?
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... said our own Nostradamus!
But indeed, why not?
Why am I relaxed, going into the trading update?
Apart from the impeccable research being done on this forum and the support of our great moderator, ShaunP, (a true blessing on a board like this; THANK YOU SHAUN!), my reasons for being relaxed are the following ...
Rarely does one see a company where so many factors are present that can have a multiplier (!) effect on the stock price, as there are:
• The real potential for much higher multiples (P/E & P/S). Re-rating of current and future multiples to be more in line with the peer group is inevitable sooner or later.
• The real potential for higher than expected revenue numbers both short term and long.
Short term, because of
o the possibility of big contracts wins (both in and outside the pipeline)
o the possibility of a positive revenue and earnings surprise for 2020 (and 2021) compared to the current analyst estimates
o the fact that the market is still in wait and see mode with a 2020 revenue number of just 240m Euro factored into the current share price
o the imminent introduction of new products (LFT, LAMP, Variplex, … ???).
Long term, because of
o the possibility of considerable upside to the non-Covid side of the business due to Nova’s considerably enlarged base. SP Angel analyst at the moment factors in just 18.7million Euro for 2022 for the non-Covid side, which is less than 0.1% of the total addressable market in which Nova operates.
Other positive factors include:
• High cash no debt; cash will only continue to grow in the short term
• High margins and high return on invested capital
• Good management team (which only got better recently)
• Large product line of non-Covid diagnostic tests
• Large distribution network
• One-stop shop for diagnostic tests and instruments through the acquisition of IT-IS
• The fact that Nova has become an integrated company which includes both the instrument side and the assay side allows for greater flexibility and cross-pollination in R&D
• Economies of scale can be realized through the recent acquisition of LAB-21 and IT-IS
• Likelihood of increased efficiency on all levels (production, distribution, R&D, management, etc.) brought along by the intense Covid experience.
Just one negative factor that I perceive for the moment is that there can be some growth pains due to the ultra-fast expansion of the company and the workforce (which may lead to lower margins after the pandemic if the revenue stream isn’t maintained at a high level). Call it the transition from war to peace time.
Due to all of the above factors, assuming the trading update is half decent, I believe any sell-off in the share price after an initial spike-up will be short lived before the stock resumes its logical up trend.
@Porky
I agree that Nova is materially undervalued compared to its peers. And so does SP Angel apparently!!!
While reading over their broker note I came across the following sentence:
“Given the discrepancy between Novacyt and the peer group average and our forecasted revenue expectations for Novacyt, we view the implied price target from our DCF (1,463p) as a conservative expectation”.
2020 Revenues of 287m to 305m (SP Angel/ Numis)
So, if we come in above these figures we have beaten expectations!!
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Note that we are still roughly 30% below the target price. So if we only come in in-line we should go up at least 30% already.
For good measure, I 've calculated that based on the broker notes, the market is currently pricing in 209m£ (or 234m Euro) of revenue.
@B2HS2L
I just wanted people to know what the share price is telling us, and that is that the market is expecting a revenue number of about 290m£. To be clear that is not my estimate.
Now if we come in at say 400 or even 500m£, it will not be difficult to figure out what it will do to the share price.
I read a post earlier in the day that we should focus on the trading update this week. I fully agree.
An important question in this regard is : 'What revenue number is the market expecting?' I have a feeling many are not sure at all. Apparently individual investors are expecting revenues ranging from 250 to 600m£.
But what does the market expect as a whole? Actually the answer is pretty simple. It has aligned itself with the broker estimates. Why? Because the current share is still below their target prices. If it were above those, that would be a clear indication the market is expecting more, but is is not. So forget about revenues of 400 , 500m£ or more, because that is NOT what the market is expecting. Anything above 290 million would be great news.
Just to be clear (for the newbees).