The rise in Zomedica Corp. (NYSEARCA:ZOM) and ZOM stock took a bit of a breather after the company offered up millions of shares at a discount.
While it’s not a dealbreaker for ZOM stock, the episode is a good reminder of how volatile penny stocks can be — and the profits that can be made for investors who are looking for solid growth names.
Zomedica is giving all indications that it could be a solid growth stock this year. The Michigan-based veterinary testing and pharmaceutical company has a product that’s set to roll out in late March.
And just as importantly, Zomedica deals in an industry — pet care — that’s becoming increasingly important and lucrative.
ZOM stock is up more than 1,700% on a year-to-date basis, rising from less than 40 cents to more than $2.60 in a matter of weeks. It has a “B” grade and a buy recommendation in my Portfolio Grader.
Let’s take a closer look at this popular stock.
ZOM Stock at a Glance
Zomedica’s rapid ascent hit a roadblock on Feb. 8, when the company announced it was increasing the size of its public offering to 91.3 million shares.
Zomedica previously had announced an offering of 13.2 million shares so it could raise $25 million. In a filing before the Security and Exchange Commission (SEC), it said it increased the offering to 91.3 million shares at $1.90 each. That would allow the company to raise $173.5 million.
That’s a big increase, but it came at a price for investors who didn’t appreciate the share dilution nor that the stock offering was at a discounted price. ZOM stock fell as much as 17% on the day.
It’s not all bad news, though. Zomedica slowly but steadily made up most of that loss in the next few days, ending the week up more than 15%. The stock isn’t all the way back, but it’s certainly on its way.
The Truforma Rollout
While it’s true that Zomedica got on the public radar thanks to Netflix (NASDAQ:NFLX) documentary star Carole Baskin, the company’s more legitimate claim to fame is its Truforma product that is rolling out this spring.
Truforma is a small diagnostic platform that can be used to diagnose thyroid and adrenal problems in dogs and cats. Those issues can be hard for pet owners to diagnose on their own — while they can easily tell if Fido or Fluffy aren’t feeling well, pets can’t describe their symptoms to their owners.
The Truforma device is about the size of a shoebox. Veterinarians and other pet-care providers can take a small blood sample and load it into the machine. They get a relatively quick diagnosis of the ailment. And it’s much faster than shipping the blood samples off to a laboratory.
Miller Veterinary Supply already signed a deal with Zomedica to market and sell the Truforma devices up and down the East Coast and all the way west to Texas. Miller is the oldest wholesale veterinary distributor in the U.S., so it’s an important partner to Zomedica.
The market for pet diagnostic testing was at $2.1 billion in 2018, and is projected to grow by 8.4% per year through 2026.
The Bottom Line
Buying Zomedica stock means getting in on the literal ground floor. The company doesn’t have any other products approved for sale. And its prospects for significant revenue — let alone, profit — in the near future is questionable.
Therefore, it’s no wonder why the company jumped at a chance to raise $173.5 million instead of $25 million in its public offering. That cash will help keep the company going as it scales production. That’s assuming Miller Veterinary is successful in its state-by-state sales job, of course.
ZOM stock is a bet on pets and their owners’ devotion. There is potential — but certainly not a guarantee — of long-term growth. Just be prepared for some volatility for now.
On the date of publication, Louis Navellier did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, the InvestorPlace Research Staff member primarily responsible for this article recently initiated a long position in ZOM. The InvestorPlace Research Staff member did not hold (either directly or indirectly) any other positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system —with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.