Valuation Does Matter If Revenue Growth Slows
Last week we posted a YTD summary of our diagnostics and tools focus stocks. Three stocks that are up over one year but have been weak in 2015. We said that revenue guidance and technicals will be important for: Exact Sciences (EXAS), Genomic Health (GHDX) and Neogen (NEOG). Genomic Health missed on revenues in 2/11 earnings report and technicals have been weak. Neogen missed on 12/18/14 reporting but technicals are stable with stock price near 52 week highs.
Exact Sciences (EXAS) reported today with losses meeting forecast but with revenues only $1.5M for the quarter on forecast but disappointing. Investors may be expecting the revenues of Cologuard to surge upward with the recent launch. Analysts estimate sales for Exact Sciences in the range of $64-$112 million for 2015 so the stock price will be extremely sensitive to quarterly reporting due to the $2B market cap and high expectations. This stock has a cult following because of the huge market for colon cancer testing and the potential of Cologuard to expand testing to individuals who avoid colonoscopies. The ramp in testing volume is difficult to forecast until we get two more quarters of results.We added the stock to our focus list on 12/10/10 at a price of $5.60 and although it has been volatile the returns are 5X. It is hard to say what to do with EXAS now as we are off the highs hit on expectations but entering a period where financial results matter a lot.
84% of the shares are owned by major institutions with all of the top 3 players in. Technicals show an August 2014 base around $20.
The stock is trading today at an amazing volume of 10M+ shares with a range of $20.35-$25.05 showing the battle between bears and the bulls. As of 3p EST the price is $22.60.