Advanced Medical Solutions (AMS:AIM)
BUY 88p
TARGET 128p
STOP LOSS 77p
Market value: £180.6 million
Prospective PE 2014: 15.5
Prospective PE 2015: 14.6
1-month price change: 9.4%
12-month price change: 27.7%
Dividend yield 2014: 0.7%
After a significant pause, the healing process seems set to continue for the share price of wound care and dressings technology specialist Advanced Medical Solutions (AMS:AIM).
The stock was something of a market darling in the late 1990s when between 1995 and early 1997 it rose by close to 500% in value to hit the equivalent of 318p as the biotechnology bubble ran ahead of the dotcom one which peaked in 2000. Subsequently the shares went into long term decline and fell by 98% from peak to trough to base at just 6.75p.
By March 2006, after a protracted period of consolidation, Advanced Medical began to show the first signs of a recovery. A surge north of 10p was critical as it sparked a run all the way up to 93p by April 2011, a move clearly defined by a bull channel on the log scale chart and one that took the shares to test the 23.6% retracement of their preceding fall.
Since then the shares have traded between 63p, the 38.2% retracement of the rise from the 2006 low, and 95p, barring one brief excursion to toward the 50% level and 56p. Over the past 16 months strong resistance at 81p has capped the upside but Advanced Medical has finally broken through this threshold. Such a move calls for a fresh assault on 95p and if that gives way then the Cheshire firm could be on the way to a complete rehabilitation.
Beyond the peaks close to 118p, last tested in 1998, the 38.2% retracement of the 1997-to-2002 fall sits at 128p. Further out, the 50% level at 165p looks a valid technical price target and only an unexpected slip back below 80p would confound the bull case.