Zomedica (NYSEAMERICAN:ZOM) has had a string of victories in recent weeks. First, it announced on Oct. 1 that it would acquire PulseVet for $71 million. Then three days later, it announced that it had hired a President with significant medical devices experience to replace current CEO Robert Cohen when he retires at the end of October. Unfortunately, neither piece of news did anything to push ZOM stock higher.
If you own shares of ZOM, I would be ecstatic that management has created a little excitement around the company. For a while there, I thought its management had taken an extended summer vacation.
I like both pieces of news. Here’s why.
ZOM Stock Ought to Trade Higher
The last time I wrote about Zomedica was in late September. At the time, I was highly concerned about the company’s inability to engage with investors. I felt that management and the board were being far too passive about their work to attract investors.
“If I’m a ZOM stock shareholder, the fact I’m hearing so little from the company is a significant cause for concern. Are things ‘quiet on the western front’ because big things are coming? Or are the crickets chirping because Zomedica carries nothing but blanks?” I wrote on Sept. 27. “I suspect we’ll find out in October.”
We sure did.
Not only did it get itself out of one-trick-pony status, it also solved its succession planning issue. It turns out the company was very busy in September; too busy to keep shareholders in the know.
And that’s okay.
I’ve liked Zomedica’s Truforma story for a while now. The PulseVet acquisition diversifies its product and service offerings to vets across the country.
Early in my career, I spent some time in sales. While I was a terrible salesperson, I knew enough that two products or services to offer a potential customer were better than one. Salespeople love to enter a client’s office with multiple ways to meet a client’s immediate and long-term needs.
From where I sit, the addition of PulseVet ought to boost Zomedica’s valuation. Yet it hasn’t.
On Sept. 27, the date of my last article about the company, ZOM stock closed trading at 54 cents. As I write this three weeks later, give or take, it’s at 51 cents. It can’t catch a break.
What’s PulseVet’s Value Add?
InvestorPlace’s Louis Navellier discussed both the acquisition and CEO hire in mid-October. He believes the pair of moves reignites the company’s exciting growth story. I concur.
Navellier highlighted the fact that the hiring of Larry Heaton as Zomedica’s CEO brings with it a man who’s got more than 35 years of experience commercializing medical devices at companies of all sizes. He will provide a strong hand as the company continues to grow its business.
“I believe that Zomedica has an abundance of opportunity to grow both organically and through business development. The TRUFORMA® point-of-care diagnostic platform represents a significant advancement in the technology available to companion animal Veterinarians,” Heaton stated in the press release announcing his hiring.
“… [T]he PulseVet acquisition announced last week reflects the opportunity to utilize available capital to expand our offerings to our combined customer base. Our goal is to continue to add high quality value-added products for companion animal veterinarians to leverage our combined sales and marketing organizations.”
The acquisition of PulseVet gives Zomedica a second razor-razor blade economic model in addition to Truforma. PulseNet has 1,500 of its systems in use in the equine marketplace. First, the vet buys the shock wave generator as capital equipment. Then every 40 or 50 therapy sessions, the vet buys an “X-Trode” handpiece that allows the animal to receive maximum shock wave therapy without being sedated.
If you were talking about a human, you might say that it’s a less invasive way to heal someone.
One thing that caught my attention is that while it specializes in the equine market, its product is also used for dogs and other small animals, providing a larger addressable market for the company.
The proof is obviously in the pudding. Next, Heaton and his sales team will have to execute its game plan.
However, I don’t think there’s any doubt the acquisition makes Zomedica a stronger company.
The Bottom Line
I’m not a technical analyst, but it seems to me that ZOM stock has formed a support line around 50 cents since August. Thus, speculative and aggressive investors ought to be comfortable buying at current prices.
Navellier had this to say about its share price:
“The $1 level should be viewed as an important objective for the remainder of the year. If ZOM stock clears that hurdle with heavy trading volume, then $1.45 and $1.70 will be reasonable targets.”
He’s not wrong.
It’s good to see Zomedica delivering good news as we move further into the final quarter of 2021. I continue to be a fan.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.