Best of The Best and Avon suffer sharp correction. Should you invest in them?

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 Best of The Best and Avon suffer sharp correction. Should you invest in them?
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Highlights

  • Best of The Best Plc share price saw a sharp sell-off after it reported a 15% drop in average weekly sales and lowered its full year guidance.
  • Avon Protection Plc has reduced its revenue and EBIDTA margin guidance for the current year.

Investors often gets worried whenever there is sudden decline in stock price of specific company. Rather than looking for the factors which led to stock price fall, often it’s a case of panic selling. However, the sudden slump in share price offers an opportunity to invest in fundamentally strong stock. The stock maybe trading at the discounted price due to several factors which the investors need to analyse before taking decision to invest.  

Let us look at two FTSE listed stocks, Best of The Best Plc and Avon Protection Plc that witnessed sharp price correction:

Best of The Best Plc (LON: BOTB)

The company organise the weekly online lottery competition in the United Kingdom to help participate win luxury goods like cars, gadgets, watches and motorbikes. It sales tickets though the online website, shopping malls and airports. The company’s stock is a constituent of the FTSE AIM All-share index.

The company derives most of its revenue from sale of competition tickets, with the United Kingdom region contributing a majority of its revenue. During the pandemic, the company’s ticket sales increased significantly as many people bought the competition tickets while at home during lockdown. Customer signed between May 2020 to April 2021 represent 40% of total revenue of the company at present.

During the full year ended 30 April 2021, the company reported a £45.68 million in revenue (2020 Revenue: £17.79 million), while its profit before tax was at £14.06 million and the earnings per share, which represent the company’s profitability increased to 122.52p per share.

What led to the sudden fall in BOTB stock prices?

The company reported a 15% reduction in average weekly sales during the first 15 weeks of the new financial year. The sales were down mainly due to significant rise in cost of acquisition of new customers. Also, the company’s marketing spend has increased by a 60% compared to previous period. As a result, the company’s board reduced full year guidance, which is 62% below the current market forecast. After the announcement, the stock was down by over 45%.

Best of the Best Plc’s current market cap stands at £143.5 million as of 13 August 2021. Including today’s share price fall of 45.25%, the stock has given negative 51.3% return in the last one year.

Avon Protection Plc (LON: AVON)

Till recently known as Avon Rubber, this FTSE 250 listed company design and manufacture the respiratory protection systems for the fire personnel, military. It also provides the helmet and impact protection, body and flat armor products.

The company reported good progress in the second half of 2021, with total order intake of USD 221 million in the ten months to 31 July 2021. The company has received a USD 9 million delivery order of first generation IHPS helmets contracts during the period.

Related Read: Does recent restructuring activities lift the financial performance of Avon Rubber?

What led to the sudden fall in share price?

The company has reduced its revenue guidance for the financial year ending on 30 September 2021. Revenue guidance for the year is between USD 245m to 260m, while the adjusted EBITDA margin is expected to lower as well, between 17% to 18%, mainly due to supply chain disruption and delay in receipt of orders. After the change in revenue guidance, the company’s stock saw sell-off from the investors and was down by over 24%.

Avon Protection Plc’s current market cap stand at £915.19 million as of 13 August 2021. Including today’s share price fall of 25.63%, the stock has given negative 38.4% returns to its shareholders in the last one year.

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