The 1 Stock I’d Buy Right Now

The business delivered a solid operational performance in the first quarter of 2019. Revenue grew 17% from the year-ago period. Operating income of $11.5 million was equivalent to roughly half of the total from all of 2018. And the company exited March with cash, cash equivalents, and marketable securities of $206 million.

How did Wall Street react? By sending shares of…

Genomic Health (NASDAQ:GHDX) tumbling 11%, of course.

Analysts were displeased that management punted on the chance to raise full-year 2019 revenue guidance and instead maintained initial expectations for 11% to 14% growth compared to last year. Since revenue grew 17% year over year in the opening quarter, that implies growth will slow as the year drags on. In essence, the company was punished for maintaining guidance. Individual investors with a long-term mindset shouldn’t be nearly as concerned. In fact, given the recent stock slide, Genomic Health is the one stock I’d buy right now. Here’s why.

By the numbers

Genomic Health reported Q1 revenue of $108.8 million driven by increases across all core products. While that represented 17% growth from the prior-year period, what’s more impressive is that the company actually managed to reduce the cost of products sold by 9% in that span. That drove a significant increase in gross profit and, together with a similar decline in R&D expenses, helped to offset rising selling and marketing expenses. The result: a $16 million positive swing in operating income.

Metric Q1 2019 Q1 2018 Change (YOY)
Breast cancer test revenue $79.8 million $71.0 million 12%
Prostate cancer test revenue $8.5 million $5.8 million 47%
International revenue $17.8 million $13.8 million 29%
Total revenue $108.8 million $92.6 million 17%
Gross profit $91.8 million $73.9 million 24%
Operating expenses less cost of product revenue $80.2 million $78.3 million 2%
Operating income $11.5 million ($4.4 million) N/A
Net income $13.0 million ($3.8 million) N/A

DATA: SEC FILING, PRESS RELEASE.

As the revenue growth suggests, Genomic Health reported a healthy increase in the number of tests sold. More than 37,580 Oncotype DX Breast Recurrence Score and Oncotype DX Prostate Score test results were delivered in the first quarter, marking a 16% increase from the same period a year ago.

Growth should…

Continue reading at THE MOTLEY FOOL

Leave a Reply

Your email address will not be published. Required fields are marked *