It’s been a hugely disappointing year for investors in Bioquell (LSE: BQE), with shares in the decontamination unit specialist falling by as much as 40% from the start of the year until the end of September.
However, as a result of continuing fears surrounding a potential outbreak of Ebola in Europe, market sentiment has picked up strongly in recent days. Shares in Bioquell are up 13% on the day (at the time of writing) as investors believe that demand for Bioquell’s products could increase over the short to medium term.
Right Product, Right Time
Indeed, Bioquell’s decontamination units provide hospitals with a simple and relatively straightforward solution for the treatment of diseases such as Ebola. Not only do they provide a means of preventing contamination, they also allow patients to be easily treated and are fairly straightforward to set up. In other words, new hospital wards are not required to accommodate them; they can be erected in existing wards in a relatively short timeframe and are highly effective in preventing contamination.
This could prove to be a perfect solution for the Ebola outbreak because we remain unsure of how severely it could affect the UK and Europe. As a result, the short lead time required to get Bioquell’s key product up and running could prove to be highly appealing to health agencies, thereby providing a boost to Bioquell’s sales in the short run.
Of course, the fact that Bioquell is gaining attention not only from investors but from the public, too, is a good thing for the company and for its shareholders. That’s because Bioquell’s decontamination units are also an effective means of partitioning an open ward so as to provide increased privacy for patients and their families. In other words, during a period of austerity, Bioquell’s units could be a means of improving the layout and offering at hospitals without the significant cost and interruption that comes with a building project.
With or without an Ebola outbreak in the UK, Bioquell seems to have bright future. For example, the company’s bottom line is expected to grow by 43% next year and, with shares in the company trading on a price to earnings (P/E) ratio of 25, this equates to a price to earnings growth (PEG) ratio of just 0.6. This is highly appealing and shows that Bioquell offers growth at a very reasonable price.
Of course, an Ebola outbreak across the UK and Europe could stimulate demand for Bioquell’s decontamination unit and send profits and its share price even higher. However, the exposure the company is currently gaining from a potential outbreak could be enough to increase demand for its units even if it does not materialise. As such, and with shares offering good value, Bioquell could move higher over the medium term.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.