Guardant Health Inc (GH): A Deep Dive into Its Performance Potential
Long-established in the Medical Diagnostics & Research industry, Guardant Health Inc (NASDAQ:GH) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 5.85%, juxtaposed with a three-month change of -26.02%. However, fresh insights from the GF Score hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Guardant Health Inc.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Financial strength rank: 4/10
Profitability rank: 3/10
Growth rank: 7/10
GF Value rank: 2/10
Momentum rank: 10/10
Based on the above method, GuruFocus assigned Guardant Health Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.
Guardant Health Inc: A Snapshot
Guardant Health, based in Redwood City, California, provides cancer blood tests and analytics for clinical and research use, and the firm maintains research partnerships with large biopharmaceutical companies. The company offers Guardant 360, a blood-based (liquid biopsy) test for treatment selection in advanced stage cancer, and Guardant Omni, a broader gene panel for immuno-oncology research. The company's pipeline includes Guardant Reveal (formerly Lunar-1), for cancer recurrence detection in survivors, and Lunar-2, a liquid biopsy for early detection of cancer in higher-risk individuals, with an initial focus on colorectal cancer. Additionally, Guardant offers research development services. In 2022, the United States accounted for 94% of revenue, and other markets the remaining 6%.
Financial Strength Analysis
Guardant Health Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 111 companies in the Medical Diagnostics & Research industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just -0.08, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.9 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 4.65, which is worse than 98.38% of 185 companies in the Medical Diagnostics & Research industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Profitability Analysis
Guardant Health Inc's low Profitability rank can also raise warning signals. Guardant Health Inc's Operating Margin has declined over the past five years ((-185,564.00%)), as shown by the following data: 2018: -102.54; 2019: -38.42; 2020: -88.92; 2021: -110.00; 2022: -121.10; .
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Guardant Health Inc has made significant strides in the Medical Diagnostics & Research industry, its current financial health and profitability metrics suggest that it may struggle to maintain its historical performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
