Zomedica (NYSEAMERICAN:ZOM) has a whopping market value of $925 million market value as of June 14. This is because Zomedica announced on May 12 that it has 974.35 million shares outstanding as of May 10, and ZOM stock opened today at around 95 cents per share.

However, ZOM stock could be worth up to $1.63 per share, based on my previous analysis. I still think that is the case, although I have lowered it slightly to $1.61, with a midpoint value of $1.36. I will show in this article how I derived this value as well.

Moreover, now that the company has $276.6 million in cash and given its recent hiring, it looks like they may go on the acquisition warpath. That might allow Zomedica to pick up sales and provide synergistic earnings sooner than expected.

What Zomedica Is Worth

There are three ways to value ZOM stock. First, after deducting the $276.6 million from the market value, the implied value of the veterinary diagnostic product business at Zomedica is $648.4 million. One Seeking Alpha analyst believes that the company will generate $50 million in sales by 2022. This implies that the company is valued conservatively at 13 times forward sales.

Second, my previous article looks at the company’s potential sales of its Truforma diagnostic product. I argued that the company could achieve 10% of the pet diagnostic market long-term. Zomedica’s 10-K states that the animal diagnostics market is projected to reach $2.8 billion by 2024, up from $1.7 billion in 2019. Moreover, they refer to an IHS Markit study that says the “global veterinary immunodiagnostic market” will be worth $2.1 billion by 2022. Assuming the U.S. is half of that market, it could be worth $1.05 billion by 2022 (using the IHS study) or $1.4 billion by 2024 (using the 10-K reference).

Therefore, conservatively assuming a 10% market share within several years, Zomedica could generate $105 million to $140 million in revenue. So at 10 times sales, the value of the business could be worth $1.05 billion to $1.4 billion within three to four years. Let’s use $1.2 billion as the midpoint.

We need to discount that figure to the present value. Assuming we use a 10% rate for 3.5 years, the discount factor is 71.635%. This implies that the present value of the veterinary business is worth $860 million. After adding back the $276.6 million in cash, this puts its total value at $1.136 billion. Dividing by the 974.35 million shares, this works out to $1.20 per share. At 15 times sales, it is worth $1.566 billion, or $1.61 per share.

Estimating Value Using Its Price Per Product

But there is also a third way of estimating its value. According to the American Veterinary Medical Association (AMVA), there were 123,472 veterinarians in the U.S, including 74,554 in private practice. Assuming half of those in private practice have their own businesses, and 15% of those eventually purchase Truforma, 5,592 would buy the machine and its lab products.

Therefore, at $13,000 per machine, sales will hit $72.696 million per year. Moreover, over time the company would make both sales overseas as well as increase the number of assays for which it can provide lab analysis. Let’s call it $80 per year in sales. Therefore at 10 times sales, the business is worth $800 million and at 15 times its value is $1.2 billion.

This third method implies a total for ZOM stock at $1.077 billion, or $1.11 per share at 10 times sales and $1.477 billion, or $1.52 per share at 15 times sales. This is roughly close to the second method used above as well.

But let’s consider this. The company also recently announced that it hired a business development officer “to lead acquisition and licensing efforts.” He previously put together 40 deals at a competitor. Moreover, the company dropped its distribution agreement with Miller Veterinary Supply, after it was taken over by another company. It seems to me they either want to develop their own direct sales force or will acquire a company that can distribute their products.

What To Do With ZOM Stock

ZOM stock is therefore worth somewhere between $1.11 per share to as much as $1.61 per share using the different methods I have shown here. Given that the stock price is at 95 cents today, this implies a potential return of 16.8% to as much as 69.5%. So the mid-point is $1.36 and the expected return is 43.15%.

Let’s say that it takes two years for this to occur. That implies a compound ROI of 19.6% annually or almost 20% per year over the next two years. that is a reasonable ROI for most investors.

On the date of publication, Mark R. Hake did not own any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.