Investors in Zomedica (NYSE:ZOM) have been taken on quite the wild ride this year. ZOM stock is up nearly 1,000% year-to-date, and over 30% this past week alone.

Why the buzz?

There are a few key things going on with this stock right now. So sorting them out is a priority.

Let’s dive into the immediate news, and cover what some of the longer-term catalysts are for this company afterward.

On March 16, Zomedica launched its Truforma diagnostics tool. This tool was expected to be released by the end of the month, so the company’s a bit ahead of schedule. The market certainly seems to like the execution of Zomedica thus far, and investors have bid up shares accordingly.

Zomedica’s Truforma tool provides quick and effective diagnosis of common illnesses found in dogs and cats including adrenal and thyroid disorders. This product is designed for in-office use, mainly for veterinarians.

A Closer Look at ZOM Stock

This is a high-margin product with a relatively large and growing market.

“The diagnostics segment of the global companion animal market is expected to reach $2.8 billion by 2024 from $1.7 billion in 2019, at a 9.8% CAGR,” the company said in a press release.

A 10% CAGR for any sector is pretty darn good. Investors are also likely bullish on the growth prospects the broader pet industry has right now.

Pet adoptions have soared during the pandemic, leading to expectations of years (or potentially decades) of growth from here.

After all, owning a pet isn’t a one- or two-quarter event, it’s a multi-year commitment.

Growth and Distribution

The first sale of any product is great. The company should make sure they make a photocopy of that receipt, frame it, and put it on the wall somewhere.

However, the more pertinent question for investors right now is how quickly Zomedica will be able to gobble up market share with this product. Indeed, there’s a tremendous amount of growth built into ZOM stock right now. I’ll get more into the valuation piece later.

On the distribution side, things look pretty good for Zomedica. In January, Zomedica announced a distribution partnership with Miller Veterinary Supply. That’s great, and investors seem to like the fact that not only is this product now being sold, but the company has a plan to get it in veterinarian offices ASAP.

I think Zomedica will be under the collective microscope of investors in the quarters to come. This is still an unproven company that has just generated its first few dollars of revenue, so any indication as to how the distribution rollout of its products is going will drive this stock price in the near-term.

Put another way, I think there’s tons of volatility on the horizon for this stock.

Valuation: Too Rich for My Blood

The company’s valuation of $2.1 billion is high when one considers the company’s estimate of the global diagnostics segment for companion animals being $2.8 billion by 2024. Yes, there’s great growth here in this market and the pie will get larger over time, but investors are factoring in market domination in this stock right now.

Total market domination is what every company strives for. However achievable that goal is, depends on the execution of said company.

Zomedica isn’t the only game in town, and this is a competitive space. I think it unlikely that this valuation will hold up over the long-term, but I’ve been wrong once or twice.

Accordingly, I’d advise investors to be cautious on headline-trading equities such as ZOM stock right now. There’s just too much uncertainty and expected volatility on the horizon to know which direction this stock is headed.

Based on some initial fundamental analysis, I believe the risk is weighted heavier on the downside than the upside right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.