Healthcare company SomaLogic, Inc. (SLGC - Get Rating) operates as a protein biomarker discovery and clinical diagnostics firm, developing slow off-rate modified aptamers (SOMAmers) and offering proprietary SomaScan services.

Renowned investor Cathie Wood’s firm ARK Invest owns 11.02 million SLGC shares for a total value of $31.95 million, according to its latest 13F filing. The imputed share price was $2.90. SLGC has a 0.2% weight in ARK Invest and a 1.12% weight in ARK Genomic Revolution ETF (ARKG). ARK owns 4.97% of the company.

Wood’s investment strategy of “disruptive innovation” seems to play well with the company’s proteomics platform that aims to address unmet medical needs. SLGC currently measures approximately 7,000 proteins and expects to move toward 10,000 proteins in the future.

However, the stock has declined 76.4% over the past year and 75.5% year-to-date to close its last trading session at $2.85. It has declined 10.7% over the past month. SLGC is trading lower than its 50-day moving average of $3.01 and its 200-day moving average of $5.26.

Here are the factors that could affect SLGC’s performance in the near term:

Weak Financials

For the fiscal third quarter ended September 30, SLGC’s total revenue increased 108.6% year-over-year to $41.71 million. However, its loss from operations rose 62.4% from the prior-year quarter to $40.61 million. Adjusted EBITDA declined 77.1% from the prior-year period to negative $31.90 million. Its net loss per share came in at $0.18.

Poor Profitability

SLGC’s trailing-12-month gross profit margin of 5.29% is 90.4% lower than the industry average of 54.85%. Its trailing-12-month EBITDA margin of negative 134.37% compares to its industry average of 3.55%. Its trailing-12-month net income margin and levered FCF margin of negative 81.72% and 54.13% compare to their respective industry averages of negative 6.23% and 2.44%.

Bleak Analyst Estimates

The consensus EPS estimate of negative $0.21 for the quarter ending December 2022 indicates a 61.5% year-over-year decrease. Likewise, the consensus revenue estimate for the same quarter of $16.15 million reflects a decline of 29.8% from the prior-year period.

Street expects SLGC’s revenue and EPS for the quarter ending March 2023 to decline 2.5% and 700% year-over-year to $22.40 million and a negative $0.16, respectively.

POWR Ratings Reflect Bleak Prospects

SLGC’s POWR Ratings reflect the company’s bleak outlook. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. SLGC has a Growth grade of D, in sync with its weak financials. The stock also has a D grade for Momentum, consistent with the fact that the stock is trading below its moving averages.

The stock has a Quality grade of D, in sync with its bleak profitability.

In the 80-stock Medical – Services industry, it is ranked #66. The industry is rated D.

Click here to see the additional POWR Ratings for SLGC (Value, Stability, and Sentiment).

View all the top stocks in the Medical – Services industry here.

Bottom Line

The company has managed to grow its top line in the third quarter significantly. However, its bottom line remains negative. Moreover, analysts expect top and bottom-line downsides for the current and the next quarter. Hence, the stock might be best avoided now.

How Doe:s SomaLogic, Inc. (SLGC) Stack up Against Its Peers?

While SLGC has an overall POWR Rating of D, one might consider looking at its industry peers, McKesson Corporation (MCK - Get Rating) and HealthStream, Inc. (HSTM - Get Rating), which have an overall A (Strong Buy) rating, and Premier, Inc. (PINC - Get Rating) and Addus HomeCare Corporation (ADUS - Get Rating), which have an overall B (Buy) rating.

SLGC shares were trading at $2.67 per share on Monday afternoon, down $0.18 (-6.32%). Year-to-date, SLGC has declined -77.06%, versus a -15.63% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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