One penny stock I once thought could soar is BATM Advanced Communications (LSE: BVC). It now looks a far cry from the dizzying heights of a few years ago.

So what’s happened? Should I buy or avoid the shares? Let’s take a closer look.

Tech stock

BATM is an Israeli-based technology business specialising in cyber security, networking, and diagnostics products for its customers. These include governments, the healthcare industry, and the military.

The shares are down 28% over a 12-month period from 28p at this time last year, to current levels of 20p. Going back even further, they’ve fallen from highs of 140p in July 2020, to current levels, which is an 85% drop.

The downfall and risks ahead

BATM capitalised on Covid, as it managed to create and sell home testing kits in partnership with medical firm Novamed. At the height of the pandemic, this served the business well, and boosted performance levels and the shares spiked.

As demand tapered off, performance and the share price followed.

To add further woes, BATM’s location in Israel has become an issue. The war in the region can’t be good for business from an operational view, and I feel this has also impacted investor sentiment. This is an ongoing risk I’ll keep an eye on. I personally do hope for a peaceful resolution to the conflict for everyone involved. If it happens, it could be good news for BATM’s future prospects.

Finally, the business is not currently making a profit. Although this is usually a red flag for me personally, I do understand it’s not unusual for small-cap shares. I’ll be keeping a close eye on trading updates.

Potential recovery?

Personally, I do believe there are high levels of demand for BATM’s products in the digital world we’re living in. Cyber security is one area where the business could see exponential growth in the future. For example, defence spending, including cyber security, is currently at all-time highs according to Statista, and shows no signs of slowing. BATM could benefit here.

Another bullish aspect I like is that the firm’s performance is heading in the right direction. For 2023, the firm reported revenue had increased from $116m in 2022, to $122m. The next positive sign would be that of a profit.

Moving on, the good news for BATM is that it has very limited debt, only $5m. This is uncommon for small-cap shares. This decent-looking balance sheet could offer the business some resilience as it looks to bounce back from a difficult period.

Finally, the shares look decent value for money on a price-to-book ratio of close to one.

My verdict

It seems to be a cocktail of issues all hitting BATM at once has hurt the business, and the shares. It’s not out of the woods yet, but there are some promising factors for me to get my teeth into.

However, I’ve decided I wouldn’t buy any shares right now, but I will keep the shares on my watch list.