Based in Ann Arbor, Michigan., Zomedica (NYSEAMERICAN:ZOM) specializes in veterinary testing and pharmaceutical products. ZOM stock is a risky bet in the pet diagnostics field, but it’s affordable and could provide powerful gains in the long-term.
Or its downward spiral could continue; that’s a possibility which prospective investors should always consider. After all, Zomedica is a small business, and its veterinary technologies aren’t guaranteed to gain traction.
Furthermore, as we’ll discover, Zomedia’s financials aren’t ideal. Therefore, it’s safe to say that ZOM stock is a highly speculative investment, and investors should only take small positions in this stock.
Still, it’s perfectly fine to hold a few shares of ZOM stock in the hope that the company will turn itself around in 2022. Besides, there’s a largely underreported acquisition which could be the key that unlocks future revenue streams for Zomedica.
A Closer Look at ZOM Stock
A year ago, the situation of Zomedica’s investors was much better than it is today. Amazingly, ZOM stock shot up from 10 cents in late 2020 to a 52-week high of $2.91 on Feb. 8, 2021.
Should we credit Reddit’s users for orchestrating this astounding rally? I’ll let you decide that for yourself, but it’s a definite possibility, as early 2021 was replete with short squeezes on low-priced stocks.
Unfortunately, the good times weren’t meant to last, as ZOM stock fell for most of the remainder of 2021. April was particularly discouraging, as the shares fell below the critical $1 threshold during that month.
Furthermore, it only got worse from there. By early 2022, Zomedica’s stock had dropped to just 32 cents.
It’s difficult for a stock to establish reliable support levels when it just keeps going down. Hopefully, retail traders will make ZOM stock their pet project again (pardon the pun), as its current shareholders could certainly use some assistance.
First, the Bad News
Now I’m not going to sugarcoat the value proposition of Zomedica. It’s a small company with lackluster financials, to put it politely.
When I first read Zomedica’s third-quarter 2021 fiscal results, I thought that my eyes were deceiving me. The press release stated that Zomedica’s total revenue for those three months was $22,514.
I looked around for something saying, “… in thousands of dollars,” meaning that its revenue was actually $22.5 million. Yet there was no such indication: Zomedica actually generated just $22,514 of sales in three months’ time.
Moreover, during the nine months that ended on Sept. 30, 2021, Zomedica reported $52,331 of revenue and a net earnings loss of $15.1 million. Clearly, its current financial performance won’t be sustainable for the long-term.
Zomedica wasn’t just idly standing by during this time, though. As CEO Larry Heaton explained, “Business development was an important focus of the Zomedica team during the third quarter, which led to the culmination of Zomedica’s first acquisition” on Oct. 1.
A Shocking Discovery
What was this acquisition? That is the billion-dollar question for Zomedica’s stakeholders.
As you may already know, Zomedica’s main product is a pet diagnostics platform known as Truforma. This product provides immunoassays, or diagnostic tests, for various diseases. These tests enable veterinarians to make clinical decisions faster and more accurately.
However, as Heaton, Zomedica’s CEO, suggested in the quote that I cited earlier, Zomedica added new products due to its recent acquisition. Specifically, Zomedica acquired Pulse Veterinary Technologies, also known as PulseVet.
It might surprise you to discover what PulseVet actually does. Reportedly, the company uses electro-hydraulic shock wave technology to treat a wide variety of conditions afflicting veterinary patients.
As Zomedica’s press release explains, “The high-energy sound waves stimulate cells and release healing growth factors in the body that reduce inflammation, increase blood flow, and accelerate bone and soft tissue development.”
You can see images of PulseVet’s equipment on the company’s website. Apparently, its sound-wave technology facilitates tendon and ligament healing, bone healing, and wound healing. while treating osteoarthritis and chronic pain
The Bottom Line
Make no mistake about it: the acquisition of PulseVet is a major gamble for Zomedica. Only time will tell whether sound-wave technology will be widely accepted by veterinarians and pet owners.
But then, who could blame Zomedica for expanding its business model? It’s not as if the company is generating millions of dollars from Truforma.
In the final analysis, ZOM stock is highly risky and best suited for speculative traders. Yet it’s possible that retail traders will bid the stock up in 2022. And if they abandon Zomedica, it would be a dog-gone shame.
On the date of publication, David Moadel 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.