Avon Protection Share Price Forecast December 2021 – Time to Buy AVON?

Shares of Avon Protection (LSE: AVON) are in the green today, currently trading around 924p at the time of writing. At one point, Avon shares peaked at 4490p in November last year, but has since fallen over 75%.  This has made many investors wonder whether this is a buying opportunity for the shares.

Avon Protection – Technical Analysis

According to the financial statement from Avon Protection, the market cap of the company is at £28.111 billion with total assets worth £30.811 billion. Revenue for 2020 was £16.80 billion with a profit margin of 4.17% compared to £12.84 billion in 2019.

Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(39.0), Williams Percent Range (14)(−75.0),  Bull Bear Power(−275.0) and Ultimate Oscillator (7, 14, 28)(41.6) are neutral. On the other hand, moving averages such as Exponential Moving Average (10)(1029.8), Simple Moving Average (10)(1040.6),  Exponential Moving Average (20)(1119.9) and Simple Moving Average (20)(1065.3) and Exponential Moving Average (30)(1223.3) are indicating a sell action.

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Recent Developments

Originally founded as Avon Rubber, Avon Protection now manufactures rubber-based products. However, in 2020, the company transformed itself into a producer of ballistics and respiratory protection systems for the military, law enforcement, and emergency responders after a decades-long transformation process.

The company has been manufacturing personal protective equipment since the 1960s including the S6 and S10 respirators for the British Armed Forces. After it acquired International Safety Instruments, Inc in 2005, the company started selling the M50 mask to the US Department of Defence in 2009 making it the most profitable wing of the company.

The company performed well in 2020, with orders increasing by 23% and revenue by 30%. The company also acquired Team Wendy, a helmet and protective gear producer, during this period.  Sales of its M50 mask remained strong throughout the pandemic, the inflated share price of 4490p put the company’s value over £1 billion. However, with projected revenue of £186 million in 2021, a crash was always going to happen. The share price took another hit when Avon’s new body armour design failed a key US Army test, denying it a much needed and valuable contract. Due to a complaint from a competitor, its new helmet design was also rejected.

The company’s management had secured a contract with the US Defense Logistics Agency to provide its Enhanced Small Arms Protective Inserts (ESAPI) body armour plates. But products like these need to go through rigorous testing before being put into service. The ESAPIplates failed during the First Article Testing round. The approval for the product has been thus pushed back to the second quarter of its 2022 fiscal year that runs to September 2022.

Should You Buy AVON Shares?

The loss of expected income from its body armour segment has undoubtedly disappointed investors. But the management of the company has already started to rectify the situation. The rest of Avon’s operations are running smoothly.  Sales of its respiratory devices have grown 23% year-on-year, while its ballistic helmets have more than doubled. This indicates that the company’s income is safe as respirators represent around 70% of the revenue stream.

The company’s 2020 guidance contains $40 million which was dependant on the helmet. The delay of the product will result in performance being below expectations next year.  Additionally, the company has postponed the release of its full-year results for 2021. Considering these factors now isn’t the right time to buy AVON shares.

 

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