Lightwave Logic, Inc. (LWLG - Get Rating) in Englewood, Colo., is a development stage company that is focused on developing photonic devices and non-linear optical polymer materials systems for fiber-optic data communications and optical computing markets. The stock was up-listed to the Nasdaq Capital Market on Sept. 1, 2021, from the OTCQX market. 

Investors’ optimism has helped its shares soar 1,649.5% in price over the past year to close yesterday’s trading session at $16.27.

However, it is currently trading 19.9% below its 52-week high of $20.30, which it hit on Dec.16, 2021. LWLG entered its fifth agreement with Lincoln Park Capital Fund, LLC in October 2021, in which the company has the right, but not the obligation, to sell up to an additional $30 million of its common stock to Lincoln Park over 36 months. However, this could lead to share dilution. Furthermore, LWLG has yet to generate sales, and reported losses in its last reported quarter. So, its near-term prospects look bleak.

Here are the factors that could influence LWLG’s performance in the upcoming months:

Early Stages of Development

LWLG currently focuses on the Datacom and telecommunications hardware supply chain for the 100 Gbps and 400 Gbps fiber optics communications market, seeking to integrate proprietary materials into the internet infrastructure’s key components. The company has more than 50 U.S. and international patents and applications issued or pending. It is expected to introduce its technology into the commercial marketplace in the foreseeable future.

Weak Financials

For the third quarter, ended Sept. 30, 2021, LWLG’s total cost and expenses increased 167.4% year-over-year to $4.25 million. The company’s loss from operations came in at $4.25 million, representing a 67.4% year-over-year rise. Also, its net loss increased 162.6% year-over-year to $4.25 million, while its loss per share was $0.04, up 100% year-over-year.

Poor Profitability

In terms of trailing-12-month cash from operations, LWLG’s negative $5.65 million is lower than the $116.95 million industry average. Likewise, the stock’s negative trailing-12-month ROCE, ROTC, and ROTA are lower than the 8.29%, 4.99%, and 3.62% respective industry averages.

POWR Ratings Reflect Bleak Prospects

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

Our proprietary rating system also evaluates each stock based on eight distinct categories. LWLG has a D grade for Quality, in sync with its lower-than-industry profitability averages.

The stock has a D grade for Stability, which is consistent with its 1.38 beta. Also, it has an F grade for Value, which is in sync with its 107.65x trailing-12-month P/B. which is higher than the 4.65x industry average.

LWLG is ranked #87 of 89 stocks in the A-rated Chemicals industry. In addition to the POWR Rating grades I have just highlighted, we have also rated the stock for Growth, Momentum, and Sentiment. Get all the LWLG ratings here.

Bottom Line

LWLG is focused on selling its products to various electro-optic device manufacturers, such as telecommunications component and systems manufacturers, networking and switching suppliers, and semiconductor companies. However, it is still in the early stages of development. Moreover, the company reported losses in the last reported quarter. So, it could be wise to avoid the stock now.

How Does Lightwave Logic (LWLG) Stack Up Against its Peers?

While LWLG has an overall POWR Rating of F, one could check out these A-rated (Strong Buy) stocks within the Chemicals industry: Kronos Worldwide, Inc. (KRO - Get Rating), Nitto Denko Corporation (NDEKY - Get Rating), and Mitsubishi Chemical Holdings Corporation (MTLHY - Get Rating).

LWLG shares were trading at $16.02 per share on Tuesday morning, down $0.25 (-1.54%). Year-to-date, LWLG has gained 7.66%, versus a 0.89% rise in the benchmark S&P 500 index during the same period.

About the Author: Manisha Chatterjee

Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst. More...

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