As my regular readers would know, Beat Billions was launched with the idea of finding small or micro-cap companies that could provide better returns than billion-dollar giants. Hence, the name Beat Billions. Medigus Ltd. (MDGS) shares are up 70% for the day as of writing this article on May 1. While some investors who had invested in the shares of the company are reaping the rewards of this massive run-up, others are wondering whether now is still a good time to be betting on MDGS stock. We will find an answer to that question in this analysis.
What does Medigus do?
Medigus is a medical device company that specializes in developing minimally invasive endosurgical tools for a variety of medical and industrial applications. The company is headquartered in Tel Aviv, Israel, and trade on both NASDAQ and the Tel Aviv stock exchange. As many of our readers know, the spread of Covid-19 has helped both small and large-scale biotech companies deliver stellar returns to investors amid the chaos in other sectors of the market. Medigus has been one of the primary beneficiaries of the novel coronavirus outbreak. MDGS stock price has appreciated a staggering 112% since the beginning of the year.
MDGS jumped today as a result of receiving its first commercial order
According to a press release filed with the Securities and Exchange Commission on May 1, the company has received an order for 10,000 testing kits from a Mexican company.
The obvious next question of our readers would be the exact value of this transaction. Unfortunately, the press release does not contain this information. The below is an excerpt from the press release that gives a vague indication of what to expect when the company reports its earnings.
The purchase order was received from a Mexican company which engages in the distribution of medical equipment to various medical centers in Mexico. Prior to placing the order, the Mexican company performed an examination of the testing kits, and following the examination, placed an order for 10,000 testing kits with a total order value of tens of thousands of dollars.
“Tens of thousands of dollars”. Well, after reading thousands of press releases, I’m positive this is the first time I’m seeing such a statement in a press release filed with the SEC. To say the least, this is very dubious.
The long-term earnings potential
These are exciting times for investors, I know. However, consuming as much knowledge about a small or micro-cap company is essential to differentiate the winners from the losers.
The order came in for a testing kit developed by Medigus to test blood samples for Covid-19. Now, there are hundreds of well-established companies that provide similar test kits, and what Medigus has developed is, by no means, a ground-breaking product. There seems to be no reason to be overly optimistic about the order the company has received as it would be impossible for the company to become a mainstream biotech company with this kind of product.
The second thing investors should keep in mind is that the company has failed miserably in the past to deliver acceptable returns to shareholders. A newcomer might not know this, but MDGS shares reached as high as $200 in 2015, before entering a bear run that saw the shares breaking the buck.
Here’s one chart that every investor should look at before placing the next “buy” order for this micro-cap stock.
Scary, I agree. But that’s what investing in equity markets bring to the table.
What should I do with my Medigus shares?
If you bought the shares in the last couple of weeks, or anytime during the last 12 months, this is your chance to get out of this troubled company for good. It would be tempting to hold on to the shares to see what the future holds, but Beat Billions concludes that being a spectator would be more rewarding than an investor.
With small and micro-cap stocks, you would never know with any degree of certainty what the future holds. The company might come up with more positive news that could help MDGS shares gain even more in the coming weeks, but the long-term earnings potential of the company is not attractive by any stretch of the imagination.
Finding the next Amazon, Netflix, or Apple sounds exciting. But, Meidgus will be none of those. Beat Billions is dedicated to finding the next winner for investors, so stay tuned while we “sift” the market to find the best opportunities.
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