Give Abcam a look after earnings beat

Government spending cuts since the financial crisis have made life difficult for Abcam, a supplier of antibodies to medical researchers. A slowdown in Japanese research funding caused a slump in the share price of almost a third earlier this year. But business has improved in recent months and, encouragingly, full-year profit is now expected to beat consensus forecasts.

Underlying growth from catalogue revenues at constant currency grew to 10.6% in the second half compared with 9.3% in the previous six months. It should be 10% for the year to June, or 6% if you factor in the strong pound. Add in other businesses like custom service and royalties, and annual revenue should be up almost 9%, or nearly 5% on a reported basis.

A new office in Shanghai helped grow Chinese catalogue revenue by a fifth year-on-year during the fourth quarter. And Abcam remains "cautiously optimistic" about prospects in the US, easily its largest market with over 40% of the business, where there's more certainty around the level of centrally funded research expenditure.

Above-market growth in Europe, Japan and elsewhere is encouraging, too, and management predict steady gross margin of about 70% and net cash of £56.8 million, worth 28p per share.

Strip out the net cash and Abcam shares - currently at 385p - trade on less than 19 times City earnings forecasts for the year to June 2015. Clearly, management thinks these levels are attractive. In the month following half-year results in March, company directors and their wives bought over £1.3 million of shares at between 367p and 397p.

And no wonder, the company has a solid record of annual growth in revenue, profit and the dividend. There's also technical support just above the 350p level, and, according to the relative strength index, (RSI) the shares are nowhere near overbought territory.

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