What happened

Shares of Co-Diagnostics (CODX -3.39%) were getting clobbered on Tuesday, with the stock down 15.9% as of 12:02 p.m. EST. The decline resulted from the molecular diagnostics company's third-quarter update, provided after the market closed on Monday. Although Co-Diagnostics reported huge revenue and earnings growth, its earnings per share of $0.53 missed the consensus analyst estimate of $0.63 per share.

So what

Missing Wall Street analysts' expectations in one quarter really doesn't matter. What does matter is Co-Diagnostics' growth prospects and whether or not the valuation of the healthcare stock already reflects those prospects.

Hand holding vial with a label showing COVID-19 positive

Image source: Getty Images.

There's a pretty good argument to be made that the company's growth prospects remain very strong. The COVID-19 pandemic is worsening in the U.S. and in many other countries. This drives demand even higher for the diagnostics tests marketed by Co-Diagnostics. The company's receipt of CE markings for its Logix Smart ABC (Influenza A/B, SARS-CoV-2) and its Logix Smart SARS-CoV-2 diagnostics tests announced on Tuesday should boost its prospects even more.

Co-Diagnostics stock's valuation also appears to remain attractive. Shares currently trade at only a little over five times expected earnings. The company can afford to miss earnings estimates to some extent and still be a relative bargain based on its growth potential.

Now what

What happens next with Co-Diagnostics depends heavily on how bad the situation gets with coronavirus outbreaks. Some experts, including longtime director of the National Institute of Allergy and Infectious Diseases Anthony Fauci, have predicted a difficult winter as COVID-19 cases rise. While this wouldn't be good news for the U.S., it would translate to greater demand for Co-Diagnostics' COVID-19 tests.