Better Robinhood Penny Stock: Sundial Producers vs. Zomedica
Robinhood investors love penny stocks. Of the 100 most popular stocks on the trading platform, 13 are currently trading for less than $ 5 per share, meeting the definition of a penny stock.
Some of these cheap stocks have been huge winners so far this year. Producers of sundials‘ (NASDAQ: SNDL) the share price climbed 180%. Zomedica (NYSEMKT: ZOM) is up over 280%.
But which of these two high-flying Robinhood penny stocks is the best choice now?
The case of sundial producers
First, let’s recognize that Sundial faces certain challenges. There has been significant price suppression in the Canadian cannabis market. Sundial’s net cannabis revenues continue to decline.
However, the company achieved something in its first quarter that several major Canadian marijuana growers have yet to do: It generated positive adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Sundial’s cost-cutting initiatives appear to be paying off.
Sundial Growers has also had success with its investing activities. In the first quarter, the company recorded C $ 2.8 million in income from interest and third party loan fees, plus C $ 12.9 million in investment gains. Expect more investment deals in the future from Sundial’s joint venture with SunStream Bancorp.
The company is also growing through acquisitions. In May, it announced its intention to acquire Canadian cannabis retailer Inner Spirit for approximately C $ 131 million. Inner Spirit operates 19 of its own stores and supports 67 franchise stores.
Sundial is expected to see sales growth thanks to the Inner Spirit deal and improved conditions in the Canadian cannabis market. The company’s investments could also pay off in the long run. Both are reasons many investors have their eyes set on this hot pot stock.
The case of Zomedica
Like Sundial, Zomedica remains unprofitable. However, that is to be expected given that the company only recently launched its first product. The good news for Zomedica is that this product, Truforma, could be a big business success in the long run.
Truforma is a shoebox-sized device used to perform point-of-care diagnostic tests for cats and dogs in veterinary clinics. Zomedica currently supports a handful of tests for the Truforma platform, including one that helps vets diagnose adrenal disease in dogs. The company is developing other tests.
Zomedica only had a little over $ 14,000 in sales in the first quarter. However, Truforma is still a relatively new device in the market and the company continues to strengthen its sales team. It is also looking to increase its licensing and acquisition agreements, and recently hired healthcare industry veteran Greg Blair to lead its business development efforts.
Pet ownership in the United States is on the rise. As a result, the veterinary care market targeted by Zomedica is expected to continue to grow. Robinhood investors aren’t the only ones interested in Zomedica. Big managers are also investing in stocks, betting the company could be a winner in veterinary care.
A better Robinhood penny stock?
I think Sundial Growers and Zomedica could benefit from improving their fortunes over the next few years. If I had to choose one of these penny stocks, I would go with Zomedica.
My main reason is that Zomedica is less likely to dilute its short-term shareholders by issuing new shares than Sundial. The company reported cash stock of $ 276.6 million as of March 31 and recorded a net loss of $ 4 million in the first quarter. Sundial had a cash position of C $ 1.08 billion as of May 7, but recorded a net loss of C $ 134.4 million in the first quarter.
While Zomedica is getting the green light on Sundial in my opinion, I don’t think either of these stocks is a great choice for most investors. Sundial and Zomedica are both very risky. My opinion is that there are many other stocks that offer more attractive risk-return propositions.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.