ASX stock of the day: AVA Risk Group (ASX:AVA) share price rockets 30%

The Ava Risk Group Ltd (ASX: AVA) share price is rocketing today, up 26% at the time of writing. Here’s why this company is exploding today.

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A rocket shoots up into space, indicating a surging share price movement on the ASX

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The Ava Risk Group Ltd (ASX: AVA) share price is rocketing today, up 25.4% at the time of writing to 63 cents a share. The Ava share price closed at just 50 cents each yesterday, the same pricing level it opened at this morning. But shortly before lunchtime, the shares spiked all the way up to 65 cents a share before settling to the current share price.

It’s a welcome move for Ava Risk shareholders to be sure. The company’s shares saw a massive spike in 2020, rising from around 16 cents at the start of the year to a high of 78 cents in December. Until today, Ava Risk was down almost 6% from those highs.

So what does Ava Risk Group do? And why is the Ava share price rocketing back up today?

Ava Risk: An intro

Ava Risk Group describes itself as “a market leader of risk management services and technologies, trusted by some of the most security-conscious commercial, industrial, military and government clients in the world”.

The company offers “a range of comprehensive solutions” for its clients. These include intrusion detection and location for perimeters, pipelines and data networks, biometrics, card access control and locking as well as secure international logistics, storage of high-value assets and risk consultancy services.

Ava Risk was founded in 1994 and listed on the ASX before the turn of the century. Today, the company has offices or operations across 6 continents. It has also, however, been unable to reach the heights that we saw back in 2015 (when the company was trading at almost $1.20 a share).

However, the company was still making waves in 2020. Back in July, Ava Risk rocketed more than 45% in one day on an earnings report. In this report, Ava told investors that its cash balance had rocketed by $4.1 million to $7.88 million for the quarter ending 30 June 2020. It also reported that it had received a loan from the US government of $333,000 as part of the US government’s COVID-19 stimulus packages. The company also reported that it expects this loan to be forgiven (which I’m sure its shareholders appreciated).

Why is Ava Risk rocketing again today?

Once again, Ava Risk appears to be shooting higher today due to the results of another favourable earnings report. This, the company disclosed to the markets this morning just before lunchtime. The report covered the first half of FY2021.

In this earnings report, Ava Risk told investors that revenues had increased by approximately 70% compared with the prior corresponding period to “be in excess of $35 million for the period”. This enabled earnings before interest, tax, depreciation and amortisation (EBITDA) to explode by 450% to more than $12 million.

It also reported that “all business units” were profitable over the 6-month period, which helped Ava increase its cash holdings to $13.4 million.

Pleasingly for investors, the company also reported that it expects its gross margins to be around 24% in its services sector, which Ava notes is “considerably above” the 25% margin that FY2020 saw.

The company also noted that a new services contract in the “wholesale banknote sector” has been awarded, which is set to commence this month. This contract is expected to bring in more than $1 million in revenues per annum.

Ava Risk Group CEO, Rob Broomfield, had this to say on these numbers:

Our record H1 FY2021 results have demonstrated that our streamlined and highly scalable cost structure, along with our diverse customer base and revenue streams, are able to show continued growth even in times as disruptive as the current global pandemic period.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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