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Here's Why Natera Inc. Stock Is Surging Today

By Cory Renauer – Updated May 10, 2017 at 4:49PM

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The non-invasive genetic screening company tests are gaining popularity.

What happened

Shares of Natera Inc. (NTRA 5.08%), a leader in non-invasive DNA analysis, finished Wednesday's session 17.6% higher following Tuesday afternoon's earnings call. Strong uptake across the board gave investors a reason to cheer.

So what 

Natera has been battered since its IPO in 2015 as a transition to in-network contracts for its non-invasive genetic tests continues to pressure total revenue. Natera might be booking less revenue per test, but it also processed more than 121,000 tests in the first quarter, about 12% more than the same period last year.

Dollar signs rising up an upward sloping chart.

Image source: Getty Images.

Investors weren't too pleased with a 24% contraction of first-quarter revenue compared to the previous-year period, but management dropped hints that the company might reach profitability before it needs to raise more capital. 

Now what

Natera left guidance for full-year revenue at between $210 million and $230 million, but it lowered its net cash burn estimate by $10 million. Now the company expects to burn through between $65 million and $75 million this year.

With $116.6 million in cash, cash equivalents, short-term investments, and restricted cash on the balance sheet at the end of March, there's a slight chance the company might reach positive cash flows before it needs to dilute shareholder value with a secondary offering.

Even after today's run-up, Natera's enterprise value is a sprightly $387 million. With leading tests in a women's health market the company estimates at more than $15 billion annually, this diagnostic stock might be in deep value territory.

Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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