With a market capitalization of $76.53 million, Precipio, Inc. (PRPO) in Palo Alto, Calif., is a cancer diagnostics and reagent technology company that provides diagnostic products and services to the oncology market. Its HemeScreen technology was adopted by American Oncology Network, LLC in August 2021. Also, its shares soared to hit their 52-week price high of $9.18 on May 4 due to investors’ optimism surrounding the launch of its COVID-19 rapid antibody test on the Amazon.com, Inc. (AMZN) business platform.

However, the stock has lost 35.8% in price since hitting its 52-week high to close yesterday’s trading session at $3.37.

PRPO announced a new at-the-market (ATM) arrangement on April 5, 2021, which is expected to be its primary financing method. Also, its current trading volume is 395,993, while its average volume is 1,577,112, indicating lowered liquidity. Furthermore,  the company’s losses widened in the second quarter. So, PRPO’s near-term prospects look bleak.

Click here to checkout our Healthcare Sector Report for 2021

Here’s what we think could influence PRPO’s performance in the near term:

Limited Use of COVID-19 Antibody Test

PRPO received  FDA emergency use authorization (EUA) for its COVID-19 IgM & IgG serology antibody test last year. However, the FDA reiterated that the antibody tests could help determine whether a person was exposed to the SARS-CoV-2 virus, but it does not determine if one has developed immunity against the virus.

Tim Stenzel, M.D., Ph.D., director of the Office of In Vitro Diagnostics and Radiological Health in the FDA’s Center for Devices and Radiological Health, said on May 19, 2021, “Antibody tests should not be used at this time to determine immunity or protection against COVID-19 at any time, and especially after a person has received a COVID-19 vaccination.” Because  74.2% of U.S. adults have already received at least one dose of a COVID-19 vaccine, the demand for PRPO’s antibody test might decline.

Top Line Growth Doesn’t Translate into Bottom Line Improvement

PRPO’s net sales increased 79.2% year-over-year to $2.34 million for the second quarter, ended June 30, 2021. Its service revenue, which accounted for nearly 87% of the total revenue, increased 26.1% year-over-year to $2.04 million. However, its operating expenses increased 18.6% year-over-year to $2.88 million. And its  net loss came in at $3.01 million, representing a 34.9% year-over-year rise. Its  loss per share was $0.14 compared to $0.20 in the year-ago period.

Poor Profitability

In terms of trailing-12-month gross profit margin, PRPO’s 26.80% is 51.3% lower than the 55.01% industry average. Likewise, the stock’s trailing-12-month EBIT margin is negative compared to the 3.28% industry average. Furthermore, its trailing-12-month EBITDA margin and levered FCF margin are also negative compared to the 6.13% and 0.10% respective industry averages.

POWR Ratings Reflect Bleak Outlook

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

Our proprietary rating system also evaluates each stock based on eight different categories. PRPO has a D grade for Quality, consistent with its lower-than-industry profitability ratios.

The stock has a D grade for Sentiment, which is in sync with analysts’ expectations that PRPO’s EPS will remain negative this year and next year. It has a D grade for Stability also, which is consistent with its 2.64 beta.

PRPO is ranked #489 of 506 stocks in the Biotech industry. Click here to see the additional POWR Ratings for PRPO (Value, Growth, and Momentum).

Bottom Line

While PRPO’s shares soared to hit their 52-week price high in May 2021 due to positive sentiment surrounding the launch of its COVID-19 antibody test in AMZN’s platform, the demand for antibody tests is expected to decline over time. In addition, the company’s losses widened despite positive developments in the HemeScreen technology front. And  analysts expect PRPO’s EPS to remain negative in the coming quarters. So, we think the stock is best avoided now.

How Does Precipio (PRPO) Stack Up Against its Peers?

While it’s wise to avoid PRPO now, one  could consider these other stocks in the same industry with an A (Strong Buy) rating: Takeda Pharmaceutical Company Limited (TAK), Exelixis, Inc. (EXEL), and Sino Biopharmaceutical Limited (SBHMY).

Click here to checkout our Healthcare Sector Report for 2021

PRPO shares fell $0.07 (-2.08%) in premarket trading Wednesday. Year-to-date, PRPO has gained 62.80%, versus a 21.57% 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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