Editor's Note: A previous version of this article incorrectly stated that Myriad Genetics recently acquired Color Genomics rather than Counsyl. The Fool regrets the error.

What happened

Shares of genetic testing up-and-comer Invitae (NYSE:NVTA) have fallen nearly 15% year to date despite integrating important new acquisitions and continuing to grow at a healthy clip. "Healthy" might be an understatement. The business reported year-over-year revenue growth of 168% in the first quarter of 2018. Gross profit soared 860% in that span.

But even that growth hasn't been enough for Wall Street to overlook two other worrisome metrics: sharply negative cash flow and mounting losses. That has forced the business to turn to dilutive capital raises, including earlier this year, as it burns through piles of cash to fuel its growth. While management promised to reduce cash burn 40% to 50% as the company exits 2018, investors are taking a "show-me" approach before assuming it's a done deal.

A chart on a chalkboard showing losses.

Image source: Getty Images.

So what

As bad as the double-digit drop so far in 2018 may sting investors who believe they're holding on to an epic growth stock in the making, shares were actually down nearly 50% at the end of March. That coincided with the pricing of a common stock offering totaling 12.8 million shares at $4.50 apiece. Not only was that an all-time low price, but it diluted existing shareholders by 23%.

Turns out, that may have been a great time to buy Invitae stock. Shares are trading hands at over $7.70 apiece in early July, or 72% higher than the offering price. Considering the business had about $130 million in capital available shortly after the end of the first quarter, and was on pace to burn about $100 million in the final nine months of 2018, investors figure the company might deliver two more quarterly operational updates before needing to raise more capital.

And with revenue and gross profits growing by triple digits, investors are betting there's some good news on the way in the coming months. While it could be risky to hand out a sharp premium to sales now in the event growth underwhelms later, in recent months Invitae has announced new partnerships to bring genetic testing into biopharma clinical trials and expanded its reproductive health offerings. It's a reminder that the market for genetic screening has plenty of room left for growth.

Now what

The genetic testing market is expanding very rapidly in 2018, and doesn't appear poised for a slowdown anytime soon. While that makes competition less of a factor than normal, investors shouldn't sleep on Myriad Genetics. Invitae has made a name for itself in recent years by being a thorn in the pioneer's side, specifically by stealing market share for oncology tests, but it could soon get a taste of its own medicine. The larger competitor recently acquired Counsyl to splash into the prenatal and reproductive health markets, where Invitae has staked a sizable portion of its growth plans. It may not matter if growth continues as expected, but head-to-head competition could cause anxiety on Wall Street if things begin to slow down.