The Motley Fool

The Avacta share price is down 15% from its highs. Would I buy it now?

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.

Coronavirus 2019-nCoV Blood Samples Medical Concept
Image source: Getty Images

When a high-performing share’s price falls from its highs, it is tempting to ask if I should buy the dip. This is the case now with biotechnology stock Avacta (LSE: AVCT). The Avacta share price has just dropped 15% from its all-time highs in less than two weeks. 

But before I buy the high-performing stock, I would like to ask three questions. These are:

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

#1. Why did the Avacta share price rise?

The Avacta share price first started rising in early April last year when it collaborated with Cytiva, which was earlier GE Healthcare Life Sciences, to develop coronavirus diagnosis tests. Unlike tests available until then, the rapid test would give results within minutes. 

This development gave the stock sharp momentum for around two months, before it settled at elevated levels compared to the pre-pandemic share price. Until early 2021, that is. 

In February this year, the Avacta share price showed another sharp climb when it received positive results for clinical studies on its tests. The initial evaluation allowed it to move to the full clinical validation of the tests. 

Then towards the end of the month, the company released a business update with optimism about the commercial potential of the coronavirus test, keeping the momentum up. And in early March the company said that its test can detect coronavirus variants found in the UK as well.

#2. What are the prospects for it?

That is a lot of positive developments for a company in a short span of time. Considering how important coronavirus tests are and will be for the foreseeable future, Avacta could well be in a sweet spot. 

I also like that it is developing therapies for cancer through its proprietary platforms. It aims to start providing its chemotherapy treatments in the first half of this year, which target achieving a more durable response in patients than existing treatments.  

These steps reflect the company’s growth, and this could well be the year that proves to be a turning point. So far however, it has made losses and its revenue has been somewhat inconsistent too.

#3. What are the risks to the Avacta share price?

There are a number of companies working on various coronavirus-related solutions, from vaccines to diagnosis and treatment. As an investor, if I am looking to buy these, I would consider this entire spectrum. And a reminder here, this includes some of the biggest FTSE companies, like AstraZeneca, and US-based ones like Pfizer

Alternatively, I can consider it if I wanted to buy shares of a company that promises fast growth. But here too, better performing companies can be found. 

What I’d do now

My point is that my reason for buying the Avacta share should be clear. If it is not, then I would rather wait for some proof of progress in its financials than be tempted today by the Avacta share price. 

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Manika Premsingh owns shares of AstraZeneca. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.