Headquartered in Utah, molecular diagnostics company Co-Diagnostics (NASDAQ:CODX) offers health-oriented products with a focus on genetics technology. In the era of the Covid-19 pandemic, CODX stock has become popular among traders, both on the buy and sell sides of the equation.
Co-Diagnostics plans to release both its fourth-quarter and full-year 2020 financial results on Mar. 25 after the close of the market. There will also be a conference call on that day.
Today, I will make the case that CODX stock is already trading at a very reasonable valuation. That situation might not last for too much longer, though, if Co-Diagnostics shares catapult higher post-earnings-release.
Perhaps more importantly, I’ll contend that the stock is worth owning regardless of how the earnings event turns out. After all, if you believe that the company has a future, then short-term events shouldn’t dissuade you from taking a long-term position.
A Closer Look at CODX Stock
Today, it’s amazing to consider that CODX stock ended 2019 at 89 cents. There’s a definite possibility that traders will never get to buy the shares below $1 again.
Due to the onset of the novel coronavirus, the demand for diagnostic testing ramped up in March of last year. During that month, Co-Diagnostic shares shot up to nearly $18.
Later, in early August, CODX stock powered its way to a 52-week high of $30.99. However, possibly because the stock just went up too quickly, the share price declined during the following months.
As of Mar. 19, 2021, the stock was trading at $14.05. Since the share price has declined, there may be an opportunity here for bargain hunters.
Notably, CODX stock has a trailing 12-month price-to-earnings ratio of 12.52. That’s quite reasonable, and it implies that Co-Diagnostics shares are low-priced in relation to the company’s earnings on a per-share basis.
Preparing for the Earnings Event
If the stock falls after the release of the earnings data – and if the data isn’t too terrible – then the shares could be an even better bargain than they are now.
Therefore, one strategy could be to accumulate some CODX stock shares prior to the upcoming earnings release. Then, buy some more shares afterwards if the stock price declines.
Reportedly, analysts on Wall Street have slashed their price target on the stock by 13%.
Bargain seekers are supposed to buy during times of pessimism, so the price target reduction isn’t necessarily a bad thing as the earnings release approaches.
Perhaps Wall Street feels that the arrival of Covid-19 vaccines will make testing less important.
I tend to disagree with this idea as new variant strains have been discussed in the media. This could lead to a renewed interest in, and demand for, readily available Covid-19 testing technology.
Testing at Home and Elsewhere
There’s a niche market which, I believe, hasn’t been fully developed yet but has strong future growth potential.
I’m referring to at-home and at-business Covid-19 testing. If this market expands in the coming months, then CODX stockholders could enjoy strong returns.
In reference to this, Co-Diagnostics recently announced “the development of a new point-of-care/at home PCR [polymerase chain reaction] diagnostic testing, screening and surveillance platform.”
This small, cube-shaped device is designed to perform Covid-19 testing not only in people’s homes, but also at “businesses, schools… hotels, cruise ships, airports, airplanes and other locations.”
Here’s how it works, in a nutshell:
- The user adds a swab or saliva sample to the receptacle tube.
- Then, he or she places the tube inside of the device.
- The device is activated via a smartphone app.
- Finally, it should deliver the results directly to the user’s smartphone.
It’s not difficult to envision this type of testing platform becoming extremely popular. This kit could be a real game changer as it could make it much more convenient to get fast results on one’s Covid-19 status.
The Bottom Line
I favor the strategy of buying a few shares of CODX stock prior to the upcoming earnings data release.
And if the stock price falls after the event, it’s not the end of the world. Feel free to pick up a few more shares at a reduced price if you still believe in the company.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.
