Co-Diagnostics, Inc.

CODX Details

Co-Diagnostics, Inc. (NASDAQ: CODX) specializes in molecular diagnostics. It creates, licenses, and sells molecular technologies such as lab systems (MDx devices) and manufactures and sells reagents for tests that rely on nucleic acid molecule detection and analysis.

Why should Investors exit?

• Customer Concentration Risk: In the third quarter ended September 30, 2021, company’s two clients contributed roughly 55% in the total income, implies a significant customer concentration risk.
• Rising Uncertainties: The Russia-Ukraine stand-off can continue to weigh on the equity market, as it has severely impacted commodities prices in the international markets which can have an elongated impact on the overall stock market performance. Therefore, small-caps and penny-caps could be higher volatile compared to their large-cap counterparts.
• Technical Weakness:  The broader trend in the stock is quite bearish, with stock hovering below its crucial long-term as well as short-term support levels of 200-day and 50-day SMAs. Moreover, the moving averages are coming down another bearish trend.    
• Bearish Candle Sticks Pattern on Weekly Price Chart: On weekly price chart, the stock is forming a lower top and lower bottom kind of pattern and falling consistently since February 2021, except couple of fake spikes. Also, the leading momentum indicator 14-Period RSI is hovering in a neutral zone, with bearish bias at 41.
• Decrease in Bottom Line: In Q3 FY21, the net income of the company has come down to USD 11.47 million from USD 15.73 million in Q3 FY20.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

CODX shares are hovering in a long-term bearish zone and forming a lower top and lower bottom kind of price patten on the daily price chart, a bearish indicator. Moreover, 14-period Relative Strength Index (RSI) is hovering in a neutral zone, with bearish bias.

Further, despite decent topline and gross profit numbers reported by the company in the quarter just gone by, company has failed to pass the same in the bottom-line performance and Basic EPS has decline from USD 0.56 in Q3FY20 to USD 0.40 in Q3FY21.

Given the penny-cap market categorization of the stock and rising volatility in the global equity market in the wake of Russia-Ukraine standoff, we believe CODX shares could be highly volatile in near-term.  CODX’s share price made a 52-week high and low of USD 14.97 and USD 5.00 and currently tilted towards the 52w low, another bearish indicator. Hence, we recommend a “SELL" rating on the stock at the closing price of USD 6.55, down by 0.15%, as of March 18, 2022.

1-year Technical Price Chart (as of March 18, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.