Is the Oxford Nanopore share price dip a buying opportunity?

The Oxford Nanopore share price has continued to slump this year. So is there now a golden opportunity for me to buy some shares at 188p?

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The Oxford Nanopore (LSE: ONT) share price has fallen 26% so far this year. Since the stock floated on the public market in 2021, it’s down 69%.

However, this innovative company is still growing strongly. So should I snap up the stock while it’s at 188p? Let’s find out.

What does it do?

Oxford Nanopore is a life sciences company founded in 2005 as a spin-out from the University of Oxford. It has developed devices that use a new approach to reading genetic code.

This technology works by passing a sample of DNA or RNA through tiny holes – called ‘nanopores’ – in a membrane. This measures how the genetic material reacts to an electrical current, and ultimately decodes the DNA and RNA of the organism.

The company claims its sequencers are capable of “the analysis of anything, by anyone, anywhere“. But what makes that unique? I mean, aren’t its competitors’ devices also meant to analyse anything anywhere?

Well, rival Illumina‘s NovaSeq DNA-reading machine is over five feet tall and weighs more than 1,000 pounds. These instruments are ideally suited to sitting on laboratory workbenches. Good luck hauling one of those through a dense jungle to sequence the DNA of some rare species in real time!

However, Oxford Nanopore’s ‘minION’ is a pocket-sized device that can provide portable long-read DNA sequencing. And the firm isn’t stopping there — the tiny ‘SmidgION’ device it’s developing plugs into a smartphone.

Results

The company released its annual results today. For the year ended 31 December 2022, the firm reported revenue of £198.6m, a 43% increase over 2021 on a constant currency basis.

It managed to reduce its loss for the period to £91m from £167.6m last time. However, the company doesn’t expect to be profitable for a number of years. So I think there’s a risk that the shares could slide further if markets remain risk-averse and if profits remain elusive for too long.

That said, it’s in a strong financial position for now to pursue further growth. It still has £558m of cash and cash equivalents, so there’s no immediate need to raise capital.

Encouragingly, the business is growing rapidly in China. With a population of over 1.4bn people (nearly all of whom have never had their DNA read), China could be a massive growth driver for it.

The firm now has a market cap of £1.58bn and the stock trades on a price-to-sales (P/S) ratio of 8.

Will I buy the stock?

I’m encouraged by the progress this innovative UK company is making. Its devices are now being used in over 100 countries. And I’m incredibly bullish on the growth prospects for the genomics industry in general.

For example, a huge initiative called the Earth Biogenome Project is currently underway. It aims to sequence the genomes of all complex life on Earth by 2028. That’s some 1.8m species, but to date only a fraction of this amount has been sequenced.

However, I note that today the CEO Gordon Sanghera has said that the firm is open to dropping its London listing for a foreign exchange in order to seek a potentially higher valuation.

That creates a degree of uncertainty for me. So I’m going to put the stock on my watchlist for now and look again once there’s more clarity around the listing.

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.

Ben McPoland has positions in Illumina. 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.

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