Global healthcare leader Sonoma Pharmaceuticals, Inc.’s (SNOA) shares soared to hit their 52-week high of $15.19 on December 11, 2020, after entering into an exclusive partnership with Crown Laboratories in connection to its Microcyn skincare products. However, the stock has lost 9.3% over the past month and 22.8% over the past three months to close Friday’s trading session at $5.67.

Moreover, its shares are highly volatile, and the company also reported disappointing financials in the fiscal first quarter. It reported losses in the quarter, and its top line also decreased. In addition, its debt could widen in the upcoming months. So, SNOA’s near-term prospects look bleak.

Here’s what could influence SNOA’s performance in the upcoming months:

High Debt

SNOA has liabilities of $5.23 million falling due within a year and liabilities of $4.27 million due beyond that. On the other hand, it has cash of $2.81 million and $3.22 million worth of receivables due within a year. So, its liabilities outweigh the sum of its cash and receivables by $3.47 million, and its debt could keep rising.

Disappointing Financials

For the fiscal first quarter ended June 30, 2021, SNOA’s revenue declined 36% year-over-year to $1.50 million. The company’s gross profit decreased 35.6% year-over-year to $1.45 million, while its net loss came in at $1.10 million, compared to a net income of $240,000 in the year-ago period. Also, its loss per share came in at $0.52, compared to an EPS of $0.13 in the prior year’s quarter.

Poor Profitability

In terms of trailing-12-month gross profit margin, SNOA’s 34.79% is 36.8% lower than the industry average of 55.01%. Likewise, its trailing-12-month CAPEX/Sales of 1.06% is 74.3% lower than the industry average of 4.14%. Moreover, the stock’s trailing-12-month EBIT margin and EBITDA margin are negative compared to the industry averages of 2.66% and 5.73%, respectively.

POWR Ratings Reflect Bleak Prospects

SNOA has an overall rating of D, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree. 

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

The stock has a D grade for Momentum, consistent with its 33% loss over the past year and 35.6% decline over the past six months. Moreover, SNOA has a D grade for Stability.

In addition to the POWR Rating grades I’ve just highlighted, we’ve also rated SNOA for Growth, Sentiment, and Value. Click here to get all the SNOA ratings.

Moreover, SNOA is ranked #155 of 212 stocks in the Medical – Pharmaceuticals industry.

Bottom Line

SNOA is currently trading below its 50-day and 200-day moving averages of $5.80 and $7, respectively, indicating that it is in a downtrend, and it could keep losing in the near term. So, the stock is best avoided now.

How Does Sonoma (SNOA) Stack Up Against its Peers?

While SNOA has an overall POWR Rating of D, you might want to consider investing in Medical – Pharmaceuticals stocks with an A (Strong Buy) rating, such as Novartis AG (NVS), Johnson & Johnson (JNJ), and Novo Nordisk A/S (NVO).

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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