Shares of Zomedica (NYSE:ZOM) ran up nearly 15% in the two trading days following the release of the company’s fourth-quarter earnings report in late February. This was despite the veterinary diagnostics specialist reporting a surprise loss of 1 cent per share. But with ZOM stock trading lower in five out of the six trading days since, it’s likely the post-earnings rally was just a flash in the pan for this speculative play.
Zomedica burst onto the scene last year with its diagnostics tool for cats and dogs called Truforma. Fans of the company talked up the potential of its shoebox-sized device that allows veterinarians to process assays on site, thus making the diagnostics process faster and cheaper.
With the global veterinary diagnostics market expected to grow at a compound annual rate of 11.2% between now and 2030, according to Grand View Research, many bought into the Zomedica story. Yet, in roughly a year since the launch of Truforma, it has yet to generate meaningful sales.
Investor Optimism in ZOM Stock Is Unwarranted
Zomedica delivered its fourth-quarter and 2021 results on Feb. 25. The company reported less than $30,000 in revenue during the first three quarters of 2021. But the acquisition of regenerative veterinary medicine specialist PulseVet added $4 million to its fourth-quarter revenue, which totaled $4.1 million.
This revenue bump likely has some investors feeling more optimistic about the company’s prospects than they have in the past. However, removing the PulseVet acquisition from the equation, the company generated revenue of just $73,000 from Truforma in Q4. That was considerably more than the $22,500 in Q3 sales, but nowhere close to the figures investors were expecting last year.
Moreover, the company’s net loss widened in 2021 to $18.4 million from a loss of around $16.9 million in 2020. Meanwhile, annual selling, general and administrative expenses rose 160% last year to $22.7 million.
The disappointments didn’t end there, though…
Zomedica’s CEO Comments Are Cause for Concern
The press release accompanying the company’s latest results contained some rather frustrating remarks from Zomedica CEO Larry Heaton, who said”: “We are pleased with our progress to date and are excited to continue building on this traction and growth trajectory.”
Management has talked a big game about the usefulness and potential of its product. But I’m guessing many investors aren’t exactly pleased with the company’s sluggish growth thus far.
Perhaps even more disconcerting was the update Heaton gave on the company’s customer appreciation program, “under which we provide veterinarians with an instrument at no cost to them in exchange for a commitment to utilize our assays.”
Essentially, the cost of the product becomes a customer acquisition expense, but giving away its pricey equipment for free seems like a desperate move. Such a development is concerning given the company’s mounting losses and weak balance sheet.
The Bottom Line on ZOM Stock
ZOM stock benefitted from a meme-fueled buying spree last year, and it probably won’t be the last time. Many bought into the company’s long-term potential. But that potential has yet to turn into a reality, with Zomedica delivering lackluster results.
ZOM stock remains a speculative bet at best.
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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.