electroCore, Inc. (ECOR) is a small-cap commercial-stage bioelectronic medicine company that is focused on developing non-invasive vagus nerve stimulation therapies. It has a market capitalization of $54.08 million. ECOR is headquartered in Basking Ridge, N.J.

Shares of ECOR have surged 31.3% in price year-to-date because investors are reacting positively to the company’s latest global expansion strategies. Over the past month, ECOR opened online shops in the United States and the United Kingdom. In addition, the company entered strategic agreements with Melidonia Health Services, Cyrus Medical Technologies, and Express Medical Solutions LLC to distribute its gammaCore nerve stimulator in Cyprus, the United Arab Emirates and Oman, Saudi Arabia, and Bahrain. Analysts expect ECOR’s revenues to rise in the coming quarters as its business expansion strategies yield new customers.

However, ECOR has yet to generate profits. Because the company is focusing on research and development and operational expansion, its bottom line is expected to remain negative in the near term. The Street expects ECOR’s EPS to remain negative until at least this year.

Here is what could shape ECOR’s performance in the near term:

Discounted Secondary Offering

ECOR announced a secondary public offering of 18 million shares of common stock on June 30 last year, priced at $1 per share. However, the company priced its shares at a 32% discount from its then trading price of $1.48. Following the offering, ECOR shares declined 25.2% in the next trading session. Furthermore, the secondary equity offering has increased the company’s total shares outstanding, thereby reducing its earnings per share and return on equity.

Negative Profit Margins

ECOR’s trailing-12-month ROE, ROA, and ROTC are negative 53.12%, 30.03%, and 34.17%, respectively. Its levered free cash flow is negative 166.44%. In addition, the company’s trailing-12-month net income margin is negative 380.37%, while its EBITDA margin is negative 413.5%.

POWR Ratings Reflect Bleak Prospects

ECOR has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

ECOR has a D grade for Stability, Momentum, and Quality. The stock’s relatively high 1.05 beta is in sync with its Stability grade. In addition, ECOR is currently trading below its 200-day moving average of $1.18, indicating a downtrend and justifying the Momentum grade. The company’s negative profit margins account for the Quality grade.

Of 190 stocks in the F-rated Medical – Pharmaceuticals industry, ECOR is ranked #119.

In addition to the grades I have highlighted above, view ECOR ratings for Growth, Value, and Sentiment here.

Bottom Line

ECOR is taking steps to improve its product quality and expand its operations internationally. However, the penny stock is highly receptive to market fluctuations. ECOR declined 13.1% intraday to close yesterday’s trading session at $0.765. The market is expected to remain volatile in the near term due to multiple macroeconomic headwinds. Thus, we think ECOR is best avoided now.

How Does electroCore, Inc. (ECOR) Stack Up Against its Peers?

While ECOR has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Johnson & Johnson (JNJ), Merck & Co. Inc. (MRK), and Novartis AG (NVS), which have an A (Strong Buy) rating.

Click here to checkout our Healthcare Sector Report

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