Dissecting Paradigm's Bullish Run-Up
Paradigm Medical Industries, Inc. (PDMI) shares are up more than 200 percent during the past week after it announced plans to upgrade their equipment so it is reimbursable by regional medical insurance companies as well as the introduction of new products.
Paradigm Medical Industries, Inc. [[PDMI.OB]], an ophthalmic surgical and diagnostic instrumentation provider, saw its shares surge higher amid new efforts to boost sales. Shareholders are hoping that the company’s efforts will pay off, but what is the real reason behind the run-up, and are shares still a bargain at these levels?
On June 1st, Paradigm announced plans to release the first of four new ophthalmic diagnostic devices, the Paravue, in the United States. The sophisticated corneal topographer utilizes Placido Disk Technology and advanced software to provide an accurate and detailed analysis of the anterior corneal surface, making it a valuable addition to optometric and ophthalmic clinics.
Last month, Paradigm also announced plans to begin clinical work to upgrade its Blood Flow Analyzer device from an Investigational to a Reimbursable level. The move could dramatically improve the device’s marketability as patients could be reimbursed by regional medical insurance companies for testing using the Blood Flow Analyzer.
Paradigm shares didn’t really start moving until this week, however. Rampant speculation surrounded the message boards, while stock promoters began creating a buzz. Unfortunately, many unsubstantiated run-ups in share price are often followed by an equally sharp decline as short-term day traders get out of the stock when it loses momentum.
What is a fair price for Paradigm shares for long-term investors? Even after the bullish run-up, the company’s market capitalization stands at less than $1 million, based on figures from its latest 10-Q filing with the SEC. Given the new sales potential, this could make the stock a bargain in the eyes of many investors.
However, a closer look at Paradigm’s 10-Q paints a more troubling picture. The company reported a net loss of $282,000 with its number of shares outstanding increasing from 7 million to 151 million shares in just one year. Meanwhile, its balance sheet is also cause for concern with just $44,000 in cash and a current ratio of 0.29 with long-term debt of more than $1.9 million.
In the end, prudent investors may want to wait on the sidelines until sales materialize and the bottom line turns positive.
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