Why Genomic Health Shares Popped

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 Genomic Health (NASDAQ: GHDX  ) , a provider of genome-based clinical diagnostic tests, popped as much as 10% following the release of its first-quarter results.

So what: For the quarter, Genomic Health reported an 8% increase in revenue to $63.1 million, driven by 69% international revenue growth to $8.5 million. Net loss for the quarter came in at $0.03 per share versus a profit of $0.03 per share in the year-ago period. The company also announced that it's gearing up to launch its Oncotype DX prostate cancer test to physicians and patients as of next week.

Now what: The move appears to be less related to the company's rather ho-hum earnings forecast than its announcement that its prostate cancer diagnostic test is ready to hit the market. Oncotype DX is expected to be the company's primary growth driver over the next couple of years, with prostate cancer being the most diagnosed cancer. Period! However positive this may be, I remain skeptical of Genomic Health primarily because of its 120-plus forward P/E and the slow domestic growth of its existing product line. It's a name I'd freely add to my Watchlist, but not a company I'd consider a remarkable value at these levels.

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.

While you can certainly make huge gains in diagnostic companies like Genomic Health, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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9/23/2016 4:00 PM
GHDX $28.84 Down -0.30 -1.03%
Genomic Health CAPS Rating: ****