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Here's Why You Should Invest in Genomic Health (GHDX) Now

Zacks Equity Research

Genomic Health, Inc. GHDX has been gaining investors’ confidence on continued positive results. Over the past year, the stock has outperformed its industry. The stock has gained 118.8% against the industry’s 16.4% fall and the S&P 500’s 6.4% rise.

This renowned global cancer company, with a focus on advanced molecular diagnostics, has a market cap of $2.56 billion.

With solid prospects, this Zacks Rank #2 (Buy) stock is an attractive pick for investors at the moment.

What’s Working in Favor?

High Potential of Prostate Cancer Test

Genomic Health’s U.S. prostate cancer business has consistently accelerated over the last few quarters. The company has seen increased adoption of this test on private reimbursement. Fourth-quarter revenues in this business rose 48% on a year-over-year basis on rising test volumes, expanding coverage and payments from private payers along with CMS coverage for intermediate-risk patients.

Moreover, Genomic Health recently announced the publication of results in Urology from a multi-center, prospective validation study of the Oncotype DX GPS test. The study evaluated newly-diagnosed men with clinically low-risk prostate cancer who chose instant radical prostatectomy after receiving the test.

Geographical Expansion

Having established a strong foothold in the U.S. market, Genomic Health is now making considerable expansion in the international arena. So far, the company has delivered over 900,000 test results to cancer patients in nearly 90 countries. During the fourth quarter of 2018, international test revenues increased 19% year over year (up 21% at adjusted constant currency) from the year-ago pre-606 adjusted tally.

In the quarter, the company witnessed a slew of developments in its international business. Genomic Health announced that the National Institute for Health and Care Excellence has issued its updated guidance recommending the Oncotype DX Breast Recurrence Score test.

Oncotype DX Breast Cancer Test — A Strong Growth Driver

So far, Genomic Health has been witnessing healthy progress with regard to establishing coverage for its Oncotype DX breast cancer test. During the fourth quarter, the company delivered more than 35,530 Oncotype test results, up 11% year over year. Further, U.S. invasive breast cancer revenues grew 22% from the year-ago pre-606 adjusted figure. Notably, presentation and publication of the TAILORx study results continued to drive test volumes, which rose 9% on a year-over-year basis.

There were other factors which contributed to U.S. invasive breast cancer revenue growth. Increased CMS pricing as a result of the implementation of PAMA reimbursement at a higher level than the 2016 invasive breast rate has been contributing to test volumes.

Which Way Are Estimates Treading?

The Zacks Consensus Estimate for first-quarter earnings is pegged at 29 cents, reflecting a year-over-year increase of 123.1%. The same for revenues stands at $106.6 million, indicating a 15.1% rise year over year.

For the full year, the Zacks Consensus Estimate is pegged at earnings of $1.49. The same for revenues stands at $444.6 million, indicating a 12.8% rise year over year.

Other Key Picks

Other top-ranked stocks in the broader medical space are Integer Holdings Corporation ITGR, Veeva Systems Inc. VEEV and Hologic, Inc. HOLX.

Integer Holdings projects an earnings growth rate of 31.2% for the first quarter. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Veeva Systems’ long-term earnings growth rate is projected at 14.8%. The stock currently carries a Zacks Rank of 2.

Hologic’s long-term earnings growth rate is projected at 8.9%. The stock presently has a Zacks Rank #2.

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