Zomedica Pharmaceuticals Has to Prove Itself to Long-Term Investors

At one point this year, Zomedica Pharmaceuticals (NYSEAMERICAN:ZOM) stock had soared a whopping 1,000%.  However, it has fallen meaningfully in the past three months.

A terrier lies on a dog bed with a cone on.

Source: Shutterstock

Earlier this year while ZOM stock was rallying, the pet healthcare company was very popular with retail traders and the launch of its veterinary diagnostics platform, Truforma, had the market buzzing for a short time. Currently, the shares are working their way back up again.

Zomedica recently launched Truforma ahead of schedule and announced the first sale of the device back in March. The product can perform five different diagnostic tests of the thyroid and adrenal conditions in dogs and cats.

Since the launch, ZOM stock has retreated sharply . The company could grow into its valuation, but clearly investors are awaiting meaningful sales numbers that will support the shares’ lofty valuation.

It’s Time for Zomedica to Perform

Zomedica recently released its dismal first-quarter results. In Q1, the company reported that its net loss had climbed about 65% year-over-year to $4 million.  Moreover, its Q1 revenue came in at just $14,124, while its selling, general, and administrative expenses roughly doubled YOY to nearly $3.5 million. With minimal revenues to offset the increase, its financials went from bad to worse.

The company recently hired Greg Blair, a highly experienced manager,  as its vice president of business development. Blair’s mission will be to generate as much revenue as possible from Truforma through  licensing and sales deals.

On the negative side, ZOM stock has been significantly diluted in the past year. Its weighted average common share count as of June 12 was 974.35 million, versus roughly 118.34 million on March 31, 2020, constituting a massive increase in its share count in a short amount of time.

Price Performance

Price Performance ZOM stock

Source: Chart courtesy of StockRover.com

Naturally,  Zomedica is hoping that its Truforma platform takes off and is a hit with veterinarians across the country.  The company, of course, would also like the device to achieve its core objectives of diagnosing and assessing certain conditions, including hyperthyroidism.  However, it’s tough to get excited about ZOM stock at this early stage of Truforma’s lifecycle.

From the chart above, we can see that the shares had a fantastic start to the year before pulling back in March. Since then, they have been trading below the $1 mark.

Because the next few months will demonstrate how much demand there is for Truforma, this period will be pivotal for Zomedica. If the company reports strong quarterly results, I wouldn’t be surprised if ZOM stock takes off and reaches new highs.

One big reason for the stock moving up has been the purchases of it by retail investors and speculators. Those catalysts could drive ZOM stock higher in the short-term. But in the long-run, the company’s sales and earnings will determine the performance of the shares.

The Bottom Line on ZOM Stock

After being one of the top-performing stocks at the beginning of the year, Zomedica has lost all its momentum. Four months into the release of its Truforma platform, the sales of the device have proven to be unimpressive so far.

To grow into its valuation, the company needs to ramp up its sales quickly.  Otherwise, long-term investors will remain uncertain about buying the shares.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

 


Article printed from InvestorPlace Media, https://investorplace.com/2021/06/zom-stock-has-to-prove-itself-as-a-long-term-play/.

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