Leading diagnostic solutions company Quidel Corporation (QDEL) in San Diego, Calif., delivers a continuum of rapid testing technologies to improve the quality of health care worldwide. The company pioneered the first point-of-care influenza test in 1999 and was the first to offer a rapid SARS-CoV-2 antigen test in the United States.

However, the stock has declined 59.5% in price over the past year and 35.7% over the past three months to close yesterday's trading session at $95.39. In addition, it is currently trading below its 50-day and 200-day moving averages of $123.05 and $128.07, respectively, indicating a downtrend.

Also, an ongoing investigation related to the company's acquisition of Ortho Clinical Holdings Plc and its poor growth prospects we think makes its near-term prospects look uncertain.

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Here is what could shape QDEL's performance in the near term:

Ongoing Investigation

On Dec. 23, 2021, QDEL agreed to acquire Ortho Clinical Diagnostics Holdings plc for $6 billion in cash and equity. According to a release, Ortho investors will receive $24.68 per share ($7.14 in cash and 0.1055 shares of common stock in the new company), representing a 25% premium, and will own approximately 38% of the combined company. The investigation seeks to ascertain if QDEL or the company's officers and directors violated securities laws or breached their fiduciary obligations to its shareholders in connection with the proposed transaction and whether the shareholders have suffered as a result.

Discounted Valuations

In terms of forward non-GAAP P/E, the stock is currently trading at 5.84x, which is 71.9% lower than the 20.79x industry average. Also, its 2.44x forward Price/Sales multiple is 56.2% lower than the 5.57x industry average. And QDEL's 2.12x forward Price/Book is 32.2% lower than the 3.12x industry average.

Poor Growth Prospects

Analysts expect QDEL's EPS to decline 11.2% in the next quarter (ending March 2022) and 45.8% in the next year. Also, the company's revenue growth is expected to remain negative next year. Moreover, the company failed to beat the Street’s EPS estimates in two trailing four quarters.

POWR Ratings Reflect Uncertainty

QDEL has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. QDEL has a D grade for Growth. The company's poor growth prospects are consistent with this grade.

Among the 57 stocks in the F-rated Medical – Diagnostics/Research industry, QDEL is ranked #16.

Beyond what I have stated above, you can view QDEL ratings for Value, Stability, Momentum, Sentiment, and Quality here.

Bottom Line

While QDEL is currently trading at a discounted valuation, its near-term growth prospects could raise investor concerns. In addition, its price performance could be impacted because the company is under evaluation for its recent acquisition. So, we think investors should wait for the company's prospects to stabilize before investing in the stock.

How Does Quidel Corporation (QDEL) Stack Up Against its Peers?

While QDEL has an overall C rating, one might want to consider its industry peers, Global Cord Blood Corporation (CO), Qiagen N.V. (QGEN), and Agilent Technologies Inc. (A), having an overall A (Strong Buy) rating.

Click here to checkout our Healthcare Sector Report for 2022

QDEL shares were trading at $93.29 per share on Wednesday morning, down $2.10 (-2.20%). Year-to-date, QDEL has declined -30.89%, versus a -6.69% rise in the benchmark S&P 500 index during the same period.

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.

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