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5-Star Stocks Poised to Pop: Genoptix

Based on the aggregated intelligence of 165,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, laboratory services provider Genoptix (Nasdaq: GXDX  ) has earned a coveted five-star ranking.

With that in mind, let's take a closer look at Genoptix's business and see what CAPS investors are saying about the stock right now.

Genoptix facts

Headquarters (Founded)

Carlsbad, Calif. (1999)

Market Cap

$309.0 million

Industry

Health care services

Trailing-12-Month Revenue

$192.6 million

Management

Founder/CEO Dr. Tina Nova 

CFO Douglas Schuling

Return on Equity (Average, Past 3 Years)

26.3%

Cash/Debt

$132.4 million / $0

Competitors

LabCorp (NYSE: LH  )

Genzyme (Nasdaq: GENZ  )

Bio-Reference Labs

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 99% of the 231 All-Star members who have rated Genoptix believe the stock will outperform the S&P 500 going forward. These bulls include Beorn10 and zzlangerhans, both of whom are ranked in the top 10% of our community.

Last month, Beorn10 tapped Genoptix's first-quarter earnings miss as a "can't miss" opportunity: "Seems like a profitable small company who did not manage analyst expectations very well. With the sell off today this appears to be a good entry point into this value play, which may eventually morph into a growth stock if they continue to show good profitability."

Unfortunately, Genoptix has continued to disappoint Mr. Market since that pitch, with the most recent letdown being a double-digit slash to both its full-year revenue and earnings outlook. In fact, Genoptix shares have been cut by more than half over the past three months, while its bigger lab services competitors LabCorp and Genzyme have basically been flat during the same period. Of course, with Genoptix now trading even with LabCorp and at a substantial discount to Genzyme on a forward price-to-earnings basis, CAPS All-Stars such as zzlangerhans are carefully starting to kick its tires:

I'm stepping gingerly into Genoptix here as it's a little outside my usual sphere of influence. I looked over their products and services last night and they do seem to be offering a slick package. Overall, I'm skeptical of the thesis that a temporary economic decline will significantly impact health care spending, which is what seems to be weighing heavily on stocks like Myriad Genetics, Genomic Health, and Genoptix. Of course, continued pessimism could make this a long-term pick.

What do you think about Genoptix, or any other stock for that matter? If you want to retire rich, you need to put together the best portfolio you can. Owning exceptional stocks is a surefire way to secure your financial future, and on Motley Fool CAPS, thousands of investors are working every day to find them. CAPS is 100% free, so get started!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. LabCorp is Motley Fool Stock Advisor pick. Genomic Health is a Rule Breakers recommendation. The Fool owns shares of Bio-Reference Labs. The Fool's disclosure policy always gets a perfect score.


Read/Post Comments (1) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 29, 2010, at 12:27 PM, biotechsaves wrote:

    GXDX 10K - "No barriers of entry,increasing competiion. No Intellectual Property" (Quest, LabCore coming soon)

    From the GXDX recently released 10K. The larger players like Quest and LabCore have a bullseye on GXDX. Pricing, Margins and efficiency metrics that WERE the reasons to buy this co are going, going, gone. Down.

    From GXDX 10K released:

    Increased competition, including from competitors replicating our key service offerings in the future and the failure to provide a higher quality of service than that of our competitors could adversely affect our revenues and profitability.

    The laboratory services industry generally is intensely competitive both in terms of service and price and it continues to undergo significant consolidation, permitting larger clinical laboratory service providers to increase cost efficiencies and change service levels, resulting in more intense competition. Most of our existing competitors and many potential competitors have substantially greater financial, sales, marketing, logistical and laboratory resources, more experience in dealing with third party payors for the services we provide and greater market penetration, purchasing power and marketing budgets, as well as more experience in providing diagnostic services.

    As a specialized diagnostic service provider, we rely extensively on our high quality of service to attract and retain community-based hem/oncs and other healthcare professionals as our customers at the expense of our larger competitors. We compete primarily on the basis of the quality of testing, reporting and information systems, reliability in patient sample transport, reputation in the medical community, access to our highly qualified hempaths and our ability to expand our service offerings to our core hem/onc customers. For example, we generally provide treating hem/oncs with telephonic access on an almost real-time basis to the specific hempath that generates a report and analysis on the specific patient. Our failure to provide services superior to the laboratories with which we compete could adversely affect our revenues and profitability.

    Because we do not rely on our intellectual property portfolio to impede others from copying our business, there are no significant barriers to entry into our business and new or existing laboratories could replicate our key service offerings and business model and enter our market to compete with us with relatively low upfront investments, which could adversely affect our business and prospects

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Brian Pacampara
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I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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