Avid Bioservices (CDMO), the contract development and manufacturing organization, has been a bit of a Wall Street enigma. Their stock, currently trading around $7, has experienced a rollercoaster ride over the past few years, leaving many analysts scratching their heads. But amidst the seemingly chaotic fluctuations, a hidden signal has emerged, one that could point towards an imminent and explosive growth phase for Avid.

The signal isn't found in any grand pronouncements or bold projections, but rather in the company's silence. Avid hasn't released a current quarter transcript. This, coupled with recent insider transactions and financial data, tells a compelling story.

While the lack of a transcript might initially seem concerning, it's crucial to consider the context. Avid, previously known as Peregrine Pharmaceuticals, underwent a significant transformation in 2018, shedding its legacy as a clinical-stage biotech company to focus solely on its contract manufacturing services. This strategic shift has seen Avid experience a surge in revenue, with their trailing twelve-month revenue hitting $136.7 million. However, they've also been grappling with profitability, reporting a negative EBITDA of $6.3 million and a profit margin of -12.93%.

The absence of a current quarter transcript suggests that Avid is in a "heads down, execution mode." They're focused on turning those impressive revenue numbers into solid profits. This hypothesis is strengthened by analyzing recent insider transactions. Four of Avid's top executives, including the President, CEO, CFO, and COO, sold significant chunks of their stock in late April at a price of $7.4. This might seem like a red flag, but it's important to remember these sales occurred before the end of the current quarter (April 30th for Avid).

"These insider sales are likely part of pre-planned, scheduled divestitures, often established for tax purposes or personal financial planning. Notably, these sales occurred at a price point significantly below the average analyst target price of $19.25, indicating strong confidence in the company's future trajectory."

Furthermore, institutional investors have been increasing their positions in Avid. State Street Corporation, BlackRock, and Millennium Management all added millions of shares to their holdings in the first quarter of 2024. This institutional backing, combined with the strategic insider sales, suggests a belief in Avid's ability to overcome its profitability hurdles and reach its full potential.

Revenue Growth vs. Profitability

Avid's financial data offers additional clues. While their current market cap stands at $554.8 million, their Enterprise Value, which incorporates debt and cash, is $641 million. This discrepancy, coupled with their strong revenue growth and a Price/Sales ratio of 3.02, suggests Avid is undervalued. The recent surge in institutional ownership further supports this notion.

Avid is poised to become a major player in the contract manufacturing space. They're already serving a growing roster of clients in the red-hot biopharmaceutical industry. As their capacity expands and they refine their operational efficiency, profitability is likely to follow. The silence surrounding their current quarter activities is not an indication of trouble, but rather a signal of intense focus on execution. Avid is diligently building a foundation for explosive growth, and the savvy investor might want to take note before the rest of Wall Street catches on.

"Fun Fact: Avid's headquarters are located in Tustin, California, just a stone's throw from Disneyland. Perhaps a bit of Disney magic is rubbing off on this up-and-coming biotech powerhouse."