RE: It seems to me faulty logic8 Jan 2021 01:03
Hi Bramley1967
The quick answer is that i don't think it will re-rate on results day, its not automatic. The SP may go up or down according to what the actual results come in at which could be good if results are above estimates which is well possible.
I have read a lot on this recently. On the AIM my understanding is that they are looking for long term earnings stability. If a business is doing say £50m profit a year for the last three years they can apply a PE ratio in line with its peers knowing that it has steady revenues. They need at least 2 years stability i understand and be confident of forecasts/estimates.
With Novacyt, they actually don't know how to rate it. They don't know if the results will be as forecast at 200m or if the results won't deliver. Add to that they don't know if this is a short term blip. IE earnings for six months with Covid and then nothing. So currently the stock sits on effectively a cash rating - that's my understanding.
How we move off this rating i'm not sure, my best hope is that IF results are solid and the forecast looks realistic the SP will go up and then by the end of H1 2021 it will be further proven and it may get re-rated during that period. Also, the market attitude is changing, they know that the established diagnostics businesses are here to stay?
Of course a couple of things could change this; they could acquire a business already listed with steady revenues and reap the benefits? my best choice would be if they merged with a US player with a Nasdaq listing, if this business with these earning was on the Nasdaq we would be seeing a serious valuation come results day imo.
I would love to see them dump the French listing in favour of a US one
Anyhow, a lot is unfortunately out of our hands and it is frustrating that the SP is not more reflective of this business. I'm also heavily invested (own cash, not profits) so i have a vested interest in them doing well but it will take time. Just frustrating seeing some of the nonsense going on elsewhere.
Good luck to you,
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