Developer and supplier of antibodies, Bioventix (LSE: BVXP), has today released an upbeat set of results. They show that the company’s strategy is progressing well and this has allowed it to pay a special dividend. But does its rising top and bottom lines make it a star buy right now?
Bioventix’s sales increased by 27% in the year to 30 June. Much of the revenue growth has come from Bioventix’s vitamin D antibody in the form of increased physical antibody sales and royalties. Bioventix feels that there will be further growth in sales because the roll out of its customer’s products for vitamin D testing has progressed, but isn’t yet complete.
The company’s strong sales growth meant that pre-tax profit soared by 35% to £4.2m. This has allowed Bioventix to increase its interim dividend to 26p per share from 21.6p per share in the same period of the previous year. This puts it on a yield of 3.1%. However, Bioventix has also announced a special dividend of 20p per share. When this is added to the yield, it means that Bioventix’s yield is almost 4.5%.
Despite such a generous payout to its shareholders, Bioventix has maintained a sound financial position. Its cash balance has risen by £1.25m to £5.4m and this shows that it has the funds available to invest for future growth.
On the topic of future growth, Bioventix is expected to increase its bottom line by 3% in the current financial year. This may be seen as a disappointment when the company has reported such strong growth for the previous financial year. However, looking further ahead Bioventix has the potential to increase its earnings through its troponin project and vitamin D antibody.
A better buy?
Of course, Bioventix lacks the size and scale of a healthcare peer such as AstraZeneca (LSE: AZN). Its pipeline of potential treatments has improved dramatically in recent years thanks to an ambitious M&A programme. This has seen AstraZeneca leverage its balance sheet and cash flow to boost its growth potential following a loss of patents on key drugs. While the company’s bottom line is due to fall further over the next two years, over the medium term it has the potential to rise rapidly.
AstraZeneca currently trades on a price-to-earnings (P/E) ratio of just 15.1. This compares favourably to Bioventix’s P/E ratio of 20.7. Certainly, Bioventix is performing better as a company than AstraZeneca in terms of delivering upbeat top and bottom line growth numbers. However, AstraZeneca yields 4.4% from a dividend that doesn’t include special dividends and that’s covered the same 1.5 times as Bioventix’s.
While both stocks appear to be worth buying, AstraZeneca’s lower valuation and lower risk profile makes it the superior stock for the long term. Its shares could continue to beat the FTSE 100, as they have done by 9% over the last year.
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Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.