Illumina (NASDAQ:ILMN) stock appears to be on course to produce its best return since 2014. That's great news for shareholders who endured paltry gains in 2015 and a big 29% drop last year.

Is the stock still a good pick? Here are three charts that every investor who owns Illumina stock or is considering buying it needs to see to better understand the reason why the gene-sequencing leader continues to present a great opportunity.    

DNA strands

Image source: Getty Images.

1. Recurring revenue

One very important thing for investors to understand about Illumina is just how much of its revenue is recurring. The follow chart details the sources of the company's revenue in the first quarter of this year.

Illumina revenue by product/service 2017 Q1

Data source: Illumina 10-Q. Chart by author. 

Nearly two-thirds of Illumina's revenue (65%) comes from consumables sales. The company expects consumables revenue to continue growing in the future. At least some portion of Illumina's service and other revenue could also be considered as recurring revenue. The company lumps two types of revenue into this category -- genotyping services and instrument service contracts. While not all of this revenue will necessarily repeat each year, much of it will.

This high level of recurring revenue means that Illumina should be able to count on steady cash flow even during periods where sales of its sequencing systems aren't as strong. That's exactly what investors should like with a stock -- some insulation from weak economic times. 

2. NovaSeq opportunity

The good news is that Illumina shouldn't have to worry too much about a sustained downturn in system sales. That's because the company launched its new NovaSeq system earlier this year. A higher-throughput version of the system is scheduled to launch later this year. Illumina thinks that it will convert many of the customers currently on its HiSeq system to NovaSeq over the next few years.

Illumina HiSeq installed base chart

Data source: Illumina. Chart by author. 

As the above chart shows, there's a sizable install base of the HiSeq systems. Illumina's prediction that it will flip many of these customers to NovaSeq doesn't seem unrealistic. The new system has a lower price tag than the HiSeq systems do -- but with higher throughput capabilities.

An even greater opportunity is attracting new customers that don't already use Illumina's systems. The company thinks that the NovaSeq technology will allow it to dramatically reduce the cost of genomic sequencing. If it's successful in doing so, that should expand the market by bringing in new customers that couldn't afford to do sequencing in the past. That would translate to higher systems sales for Illumina and a larger base for recurring consumables sales.

3. Research and development spending

If you think Illumina will rest on its laurels with NovaSeq, think again. The company has continued to pour increasingly more money into research and development. That trend doesn't appear likely to change anytime soon.

ILMN Research and Development Expense (TTM) Chart

ILMN Research and Development Expense (TTM) data by YCharts.

This chart could be the most important of the three to long-term investors. Illumina's moat comes from its technological dominance. The best way to ensure that dominance continues is to invest in research and development. That's exactly what Illumina has been doing, with R&D expenses more than doubling over the last five years.

As long as Illumina can preserve its moat, the recurring revenue from consumables will keep rolling in. Sales to new customers will also likely grow if the company's products continue to be leading edge. There's no guarantee that putting money into R&D will keep Illumina at the top of the gene-sequencing industry, but doing so certainly improves the company's chances. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.