Why Genomic Health Shares Dove

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of molecular diagnostics company Genomic Health (Nasdaq: GHDX  ) dropped as much as 21% today after the company reported disappointing third-quarter earnings results.

So what: For the quarter, Genomic reported a 12.5% increase in revenue to $58.6 million and an adjusted profit of $0.11. Revenue figures came in shy of Wall Street's consensus estimate of $59.9 million, while EPS was a saving grace, beating forecasts by $0.06. During the quarter, Genomic delivered 7% more Oncotype DX test results compared to the year-ago period, and it announced positive prostate cancer validation study results that should allow its Oncotype DX to be marketed as a prostate cancer diagnostic test by the first half of 2013.

Now what: What this really comes down to is investors expecting much more in terms of Oncotype DX growth from a company trading at a frothy 83 times forward earnings even after today's large drop. This is a case where the technology makes sense on paper and should eventually become a success, but weak global growth and a relatively young product are creating a melting pot of concerns that will take some time to congeal. I'm perfectly happy watching Genomic Health from the sidelines in the meantime.

Craving more input? Start by adding Genomic Health to your free and personalized watchlist so you can keep up on the latest news with the company.

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10/27/2016 4:00 PM
GHDX $29.97 Up +0.06 +0.20%
Genomic Health CAPS Rating: ****