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Image source: Exact Sciences.

What: Following the inclusion of its Cologuard test on important treatment guidelines and ahead of strong second-quarter results that included a record number of completed colon cancer tests, shares in Exact Sciences (NASDAQ:EXAS) rallied 41.2% last month, according to S&P Global Market Intelligence.

So what: In mid-June, the U.S. Preventative Services Task Force (USPSTF) released finalized colon cancer screening guidelines that elevate Exact Sciences Cologuard to the same level of recommendation as other screening methods, including colonoscopy and fecal blood testing. 

The news was a big win for the company because tentative guidelines issued last year had labeled Cologuard as an alternative screening method.

The finalized guidelines add conviction to the thinking that demand for Cologuard could increase given that studies have suggested its more accurate than fecal blood testing and it's less invasive than other screening options.

On July 26, management issued second-quarter results that suggest that Cologuard's advantages are resonating with doctors and patients. The company completed 54,000 Cologuard tests during the quarter at an average of $391 per test. That was better than the 40,000 tests at an average $370 per test in Q1.

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Image source: Exact Sciences.

Now what: Although Exact Sciences sales are surging on increased prescribing of Cologuard, investors should remember that the company is losing a lot of money. In Q2, Exact Sciences expenses increased to $56.2 million from $42.4 million in the same period in 2015. Because of its spending, it lost $44.8 million in the quarter, or $0.46 per share. That was a bigger than the $39.1 million loss in the same period one year ago. 

The expenses are in large part the result of a ramp associated with increasing awareness of Cologuard and, theoretically, the pace of expense growth to sales should slow over time as the test becomes better known. Having said that, there's no clear path to profitability and that means this is a risky stock.

Nevertheless, the USPSTF guidelines could allow Exact Sciences to overdeliver on its estimate for the completion of 240,000 tests this year. If so, then it could handily exceed its sales outlook of in excess of $90 million. A beat of that forecast would certainly be welcomed by investors, especially since management believes that the total addressable market for Cologuard is $4 billion. The potential to tap an increasingly larger share of that market makes Exact Sciences intriguing, particularly for risk-tolerant investors who don't mind taking a long view. 

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.