Stage Zero Life Sciences Ltd.

Stage Zero Life Sciences Ltd. (TSX: SXLS) is a Canadian firm that develops and sells patented molecular diagnostic tests for early illness identification and individualized health management, focusing on cancer-related indications.

Recent Highlights

• The company recently acquired CareOncology, which resulted in the formation of a vertically integrated healthcare organization.
• AristotleTM, the company's proprietary multi-cancer blood test, now has an on-site clinic in Richmond, operating a hub-and-spoke strategy for personal specimen collection.
• The company commenced trading on the OTCQB exchange in Q3FY21 and induced a new CFO and COO to its management team.
• It also announced a partnership with Teen Cancer America to work on the early detection and treatment of cancer in adolescents and young adults.

Why Investor's Should Book Profit?

• Operational Update: In Q3FY21, SZLS reported a net loss of CAD 2.2 million, representing a diluted loss per share of CAD 0.02, compared to a net loss of CAD 2.3 million in pcp. The improvement in the bottom line was due to a CAD 2.4 million gain on the fair value of convertible debentures and warrant re-valuation.

• Challenge with Revenue Generation: The company reported a constant decrease in net revenue in the recent quarters, dampening its overall financial flexibility. Notably, the group reported its net revenue of CAD 0.68 million in Q3FY21, against CAD 1.46 million in Q3FY20, which is significantly lower.            

• Significant Uptick in Stock Price: The company's stock price has surged 64.71% in the past three months. From a technical standpoint, the momentum oscillator 14-day RSI (~80.59) is in the overbought zone, making it expensive at the current levels.
• Hovering Near the Upper Band of Bollinger Band Indicator: At the daily price chart, the stock of SZLS is above the upper range of its 20-days Bollinger band, indicting a possible correction from the recent level.

Technical Price Chart (as on November 22, 2021). Source: REFINITIV, Analysis by Kalkine Group

Stock Recommendation:

The company generated CAD 0.68 million in revenue in the third quarter, compared with CAD 1.46 million in the year-ago period. Net loss for the quarter totaled CAD 2.2 million. Adjusted EBITDA for the quarter totaled CAD (2.147) million. However, the stock is trading at stretched valuations on multiple fronts compared to the industry, indicating that the strong business fundamentals are adequately reflected at current trading levels. Furthermore, even the technical indicators point towards an overbought zone and the price may correct or consolidate further. Therefore, based on the above rationale and valuation, we recommend a "Sell" rating on the stock at the closing price of CAD 0.56 on November 22, 2021.

One-Year Technical Price Chart (as on November 22, 2021). Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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