diaDexus, Inc. (OTCMKTS:DDXS)’s Volatility Results in a Turbulent Stock Performance
Finding a solid long-term investment on the OTC Markets is not that easy. The propositions are many but a huge part of the small cap companies are in a horrific financial state, a lot of them become the target of paid promotions every now and then which often results in a terrible stock performance and for a large chunk of penny stocks, a commercialized product is nothing but a distant dream. diaDexus, Inc. (OTCMKTS:DDXS) is different.
Their PLAC Test went through the FDA approval process more than ten years ago. They have the privilege to claim that their product is indeed one of a kind, they have found quite a large market for it and they are optimistic about the future (to some extent, rightly so). The latest report covers the second quarter of 2013 and it treats investors to one of the more decent looking financial statements in Pennyland. It boasts cash reserves of $11.9 million, a positive working capital of around $12 million and quarterly revenues of no less than $6.2 million.
More importantly, the 10-Q reveals that DDXS are making quite a lot of progress. The revenues have increased by about 21% year-over-year while the net loss has shrunk by a whopping 46%. What’s more, pharmaceutical giant GlaxoSmithKline plc (NYSE:GSK) are currently running Phase III trials for a drug called darapladib and if the treatment does eventually hit the market, it could give DDXS‘ revenues a further boost. Even if it doesn’t, the progress so far seems consistent enough.
Yet, despite all the upsides, DDXS‘ stock has failed to reflect the company’s situation over the years. Back in June, the ticker was hovering in the $0.75 – $0.80 range and trading volumes were so small that nobody was really paying attention. Then, towards the end of July, probably in anticipation of the Q2 financial results, the ticker started shuffling a bit and it broke through the $1 per share barrier. August saw some hesitations, but out of the twenty trading sessions in September, just five ended in the red which is an astonishing performance for a penny stock. The ascend continued during the first days of October and a new 52-week high was registered last Thursday when DDXS briefly touched $2 per share. Since then, however, things haven’t been quite so optimistic. A few consecutive red sessions wiped out around 15% of the value and although it managed to bounce by about 3% yesterday, a price of over $2 still seems quite distant. What can be learned from this?
Well, you can see that while the company does appear as a solid proposition in terms of operations and financial statement, it still suffers from the unpredictability associated with penny stocks. We see other OTC ventures with relatively decent positions and real operations like Sigma Labs Inc (OTCMKTS:SGLB) also go through some not particularly pleasant periods and it seems that there simply isn’t a cure for the volatility of small cap tickers. We reckon, however, that in the case of DDXS, there is something else contributing to the turbulent chart movement.
The latest financial statement was published on August 8 and apparently, the promoters saw an opportunity. A couple of days later, a few pumping outfits, including Penny Pick Finders, Penny Stock Prophet and Momentum OTC started sending some alerts. The disclaimers say that no compensation has been received, but, at the end of the day, the raised awareness resulted in nothing more than a couple of negative sessions. We also see that a few optimistic Seeking Alpha articles have appeared on the company’s Yahoo! Finance profile. Most of them were authored by enthusiastic shareholders and while, generally speaking, there’s nothing wrong with that, we’re not sure if the ticker really needs the extra attention. Not least because with all the optimism now, investors’ expectations about the future are going higher and higher. This means that potential setbacks, even minor ones, could easily throw the ticker off course.
