Shares of Co-Diagnostics (NASDAQ:CODX) have bounced around a bit this year, to say the least.

At the start of the year, you could buy a share in the Salt Lake City-based molecular diagnostics company for less than a dollar. By Aug. 8, the price was $30.80 after the company announced it was working with partner Clinical Reference Laboratory to produce a saliva-based COVID-19 test using Co-Diagnostics' technology. That was a huge deal because it meant people could get an accurate test without an invasive nasal swab.

However, a few days later, after a second-quarter earnings miss, the stock dropped. Less than a month after that, on Sept. 4, the company's shares were down to $8.24. On Friday, they were back up more than 67%, past $12 a share, on the news of its partnership with Arches Research, a subsidiary of Polarity TE (NASDAQ:PTE), to sell Co-Diagnostics' Logix Smart Coronavirus Disease test kit. That bit of good news came after an independent study gave high marks for the accuracy of the Logix Smart test.

Hand drawing an upward arrow chart.

Image source: Getty Images.

What's behind the volatility?

Co-Diagnostics manufactures polymerase chain reaction (PCR) test kits to detect various infectious diseases, but its COVID-19 tests have been the primary driver for the company's revenues this year. Like other molecular tests, these are considered highly accurate, and the company received an Emergency Use Authorization (EUA) approval from the U.S. Food and Drug Administration (FDA) for its COVID-19 test in April.  

The problem, at least in many investors' eyes, is that there's a lot of competition already in COVID-19 testing. Abbott Laboratories (NYSE:ABT), for example, has a $5 antigen-based test that gives results in 15 minutes. As of Friday, the FDA said it had authorized, via EUAs, 247 COVID-19 tests, including 197 molecular, 46 antibody, and four antigen-based tests. 

CODX Chart

CODX data by YCharts

CODX data by YCharts 

The numbers give cause for optimism

The company's revenue over the past six months was a reported $25 million, up a whopping 393% year over year. Most of that revenue has come in over the past three months from the company's nasal swab coronavirus test kit, which management says has a gross margin of 70%. That also boosted the company's net income to a reported $11.5 million in the first six months, compared to a loss of $2.7 million over the same period a year ago.

At the pace it's going, this will be the company's first year with positive net income since it was founded in 2013. Co-Diagnostics is in a solid cash position at the moment with $18 million on the balance sheet, compared to less than a million in the same quarter last year.

It makes sense that Co-Diagnostics is focusing most of its efforts on its COVID-19 tests, as that's where the sales are this year. However, it has also developed a liquid biopsy to detect cancer, a molecular test for tuberculosis, and molecular tests for Zika, dengue, Chikungunya, and other mosquito-borne viruses. In the long run, its COVID-19 test may prove to be a big earner in part because Co-Diagnostics has beefed it up with a respiratory virus panel to differentiate between influenza A, influenza B, and COVID-19. That could potentially have a big effect; a 2018 Centers for Disease Control study found that an average of 8.3% of people in the United States are infected by flu strains each year.

What if a vaccine is found for COVID-19?

While an effective vaccine for COVID-19 would obviously put a dent in the demand for a coronavirus test kit, the tests will still be needed as schools and companies ramp up the return of students and workers. This will be the case until nearly everyone is vaccinated, which will likely take awhile. In the meantime, COVID-19 tests are needed to diagnose potential patients and help prevent the spread of the disease. The tests also help with tracking how and where COVID-19 is spreading.

Management at Co-Diagnostics said they feel the accuracy of the company's tests and its ability to screen large numbers of people give it an edge over competitors in the molecular test space.  

Is the stock still a good buy?

Based on the company's improved financial position, I'd say yes, especially since it has come down off its highs of a couple of months ago. Co-Diagnostics is a growth stock, and one that is already making money. Its recent infusion of cash will allow it to develop more products that could carry it to success long after the COVID-19 pandemic is over.

Like a lot of growth stocks, its share price is a little bit ahead of its earnings, but I like the company's ability to shift gears, as shown by its switch to a saliva test for COVID-19.