The Omega Diagnostics (LSE: ODX) share price has been on a rollercoaster ride over the past 12 months.
Since the middle of July 2020, shares in the company have returned 19%. However, between the end of November and the beginning of March, the stock returned more than 100%. Between March and today, it has declined more than 50%.
Nevertheless, despite this volatility, longer-term investors have been well rewarded. Investors who were savvy enough to buy at the end of March 2020 are currently sitting on gains of more than 500%, even with the recent volatility.
And considering the recent volatility, I am beginning to wonder where the Omega Diagnostics share price will go next?
Falling revenues
It is impossible to predict stock price movements in the short term. Still, in theory, equity prices should track the performance of their underlying businesses in the long run.
When it comes to the Omega Diagnostics share price, it is challenging for me to say whether or not the company will continue to grow over the next few years.
According to the group’s full-year results for the financial year to the end of March 2021, revenues decreased 11% to £8.7m. Due to lower sales, the company reported a statutory loss for the year of £2.1m.
During the year, the testing group restructured into two primary divisions. Global Health covers HIV and Covid-19, and Health and Nutrition covers food sensitivities.
Sales in the latter division fell last year as a result of the pandemic. Sales of food sensitivity products declined from £9.2m to £6.8m.
Meanwhile, Global Health division sales increased to £1.9m for the year, up from £0.7m in the prior year. Revenues generated from Coivd-19 antibody tests accounted for all of the increase. Unfortunately, revenue from sales of these tests was lower than expected as “antibody testing was not adopted as widely as initially expected“.
To that end, the company is pursuing the development and sale of other rapid Covid tests.
Omega Diagnostics share price challenges
I think these results present a mixed picture of the group. The pandemic has hurt revenue overall, and sales of Covid tests have not been enough to cover the losses.
As the pandemic continues to rumble on, it is not clear at this stage if that will change. The company itself has noted sales of testing kits are “very much dependent on the UK Government’s decisions as to test selection and timing“.
As such, I think the Omega Diagnostics share price could continue to drift lower. The market hates uncertainty, and right now, the company’s future is incredibly uncertain. It also remains at the mercy of the government.
This makes it challenging for me to say whether or not the business will see improved profitability in the months ahead. And if I am struggling to analyse the company’s prospects, other investors may be as well.
Therefore, considering this uncertainty, I will not be buying the stock for my portfolio.
