Abcam Plc Exceeds Expectations

Growth is on track at Abcam Plc (LON: ABC); is there a bargain here?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Every investor’s heart flutters when a company releases an ‘exceeding expectations’ statement, and that is exactly what AIM-listed protein research tool supplier Abcam (LSE: ABC) did this morning. Overall, second-half sales are up around 10%, and the firm’s new China operation delivered an exciting 20% year-on-year revenue growth in the final quarter of Abcam’s trading year.

The market likes it. Abcam shares are up almost 6% on yesterday’s close at 380p, as I write, providing welcome relief to existing shareholders who’ve clung on while the shares slipped from the 520p they achieved in early 2014.

Hang on — the share price is well down from its highs and the latest market update is positive. I can feel my growth-at-a-reasonable-price receptors twitching!

Picks and shovels for scientists

If you’ve ever invested in the wild frontier of biotechnology or pharmaceutical development, you’ll know that hunting for the next blockbuster drug often involves putting your money into profitless research firm’s with a propensity to gobble cash as scientists beaver away hunched over their test tubes.

The most frequent outcome in the early stage life science sector seems to be that firm’s host a series of fundraisings that dilute investors’ interests into insignificance, making any eventual commercial gain meaningless to long-suffering shareholders. Such companies also have a propensity for going bust, which means total loss of investment.

Wouldn’t it be good to invest in a company that supplies the tools that this army of scientists needs to carry out their research, thus investing in the industry as a whole, rather than taking a mad punt on any one pie-in-the-sky investment story? Well we can, with Abcam.

Abcam produces and distributes protein research tools that enable life scientists to analyse components of living cells at the molecular level, which is an essential part of understanding health and disease. The firm’s vision is to create the world’s leading life science reagents company.

Amongst other things, the firm supplies a neat line in Monoclonals, Polyclonals and Conjugated Primary Antibodies – manna from heaven for any self-respecting research scientist needing high performance products with detailed technical specifications; which means most of them.

Driving growth

Abcam’s growth strategy aims for both organic and acquisitive progress and, as with any decent growth proposition, the firm focuses on quality, cost-control, and delivering operations as close to excellent as it can.

The formula has seen some success:

Year to June 2009 2010 2011 2012 2013
Revenue (£m) 57 71 83 98 122
Net cash from operations (£m) 15 20 25 24 39

That’s impressive-looking growth, but Abcam’s acquisition strategy means that fund-raising along the way has diluted investors’ interests to some extent.

Valuation

At a share price of 379p, Abcam trades on a P/E rating of about 21 and the shares yield a dividend of around 2.2%. Based on what we know, I think the firm is worth further research. We’ll find out more with the full-year results due on 9 September 2014.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any shares mentioned. The Motley Fool has no position in any of the shares mentioned.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »