BATM Advanced Communications (LSE: BVC) might be a small company, but it’s hard to overlook. The Israel-based technology company is developing diagnostic kits for Covid-19. It expects them to be ready for sale this quarter. This could be the turning point for the company, and, at least partly in anticipation, investors have flocked to the stock, making it the best-performing UK share in the first half of 2020 according to research from IG.com. BVC’s share price rose a huge 267% and it has settled at these elevated levels in the three months since.
While stocks like BVC can be the stuff of investing dreams, making millionaires of us overnight, it certainly wouldn’t harm us to consider both its merits and demerits before making a call. It’s great to make huge profits, but it’s also important not to get burnt.
Covid-19 diagnostics made it the best UK share
First, the merits. BVC has just garnered an €3.4m order for Covid-19 diagnostic kits and instruments. This adds to its credentials in the pandemic, especially for its bio-medical division which brings in a large 65% part of revenue. This division also showed strong growth of over 65% in the first-half of 2020 compared to last year.
BVC’s networking and cyber division also showed an increase in revenue though it was much smaller. I think even though this segment isn’t the centre of attention right now, the lockdown has encouraged new home broadband solutions, which benefit this segment. All in all, the company appears to be poised for growth. Its outlook is expectedly optimistic. It will also pay dividends now, which shows confidence in its future. The amount will be known when it releases its full-year results.
A word of caution
However, there are some downsides to the stock as well. It’s a small company, which has been growing its revenue every year but its profits are less dependable. Following from this, I wouldn’t depend on its dividend payouts for the long term. I’d look to it more for growth than anything else. With respect to growth too, I’d ask how far the stock price can rise. The company’s earnings ratio is at a huge 106 times as I write. Clearly, this makes BVC a valuable company in investors’ eyes. At any other time, I’d wonder if the share price rise can continue. But in the present times, investors clearly don’t seem to care much about earnings ratios. Consider the cases of FTSE 100 stocks like AstraZeneca and Ocado, which show that the share price can continue rising even if it has already sky-rocketed.
If BVC goes from strength to strength in the pandemic, it could come out far ahead by the time we see the end of Covid-19. If something goes wrong, however, it could take a bigger hit than a far larger company will. On the whole, though, I think that the UK’s best share in 2020 is worth considering at the very least.
