In a year full of ups and downs for Exact Sciences Corporation (EXAS -1.32%) stock, things are definitely looking up right now. Its shares are up more than 40% after the maker of the Cologuard DNA colon cancer test reported strong third-quarter results last week.

This gain continues an impressive performance for Exact Sciences, with its stock soaring more than 660% over the last three years. But is Exact Sciences stock still a buy after its huge run-up?

Cologuard colorectal cancer DNA test packaging.

Image source: Exact Sciences.

Tremendous opportunities

The bullish case for Exact Sciences is that the company has tremendous opportunities ahead of it. Sales for Cologuard are growing briskly -- 63% year over year in the third quarter. However, the DNA test really hasn't begun to tap the potential market.

Colon cancer is very preventable if caught early. Yet it's still the No. 2 cause of death from cancer in the U.S. The reason is that many Americans who should be screened for colon cancer don't undergo recommended screening. The screening rate for Americans has been relatively flat over the last few years, according to the Centers for Disease Control and Prevention (CDC).

Exact Sciences thinks that Cologuard provides the answer to the problem. Many individuals choose not to undergo a colonoscopy because they have to take time off from work, the procedure is invasive, and the preparation isn't pleasant. Cologuard, though, eliminates all these negatives and boasts a 94% early-stage cancer sensitivity.

The company estimates that there are at least 85 million Americans between the ages of 50 and 85 with an average risk of colon cancer and no symptoms of the disease -- the target market for Cologuard. This translates to a total addressable market of more than $14 billion. Cologuard only captures 3.4% of that market currently.

That market could grow even larger. In June, the American Cancer Society changed its guidelines to recommend that the minimum age for average-risk colon cancer screening be lowered from 50 to 45. There are around 20 million Americans between the ages of 45 and 49.

Exact Sciences and Pfizer began working together in October 2018. Pfizer's sales team is actively promoting Cologuard. Exact Sciences thinks this partnership could help increase Cologuard sales from around $435 million this year to more than $700 million in 2019.

Meanwhile, Exact Sciences is also working with the renowned Mayo Clinic to develop liquid biopsies for the early detection of cancer. The company recently acquired Biomatrica, which has a best-in-class technology for stabilizing and preserving DNA in blood, as part of its strategy on this front. Analysts estimate that the liquid biopsy market could total more than $13 billion annually by 2030.

But major risks, too

As exciting as Exact Sciences' growth prospects are, the reality is that they're largely priced into the company's valuation. Exact Sciences isn't profitable yet, but its price-to-sales ratio is close to 26. To get to a more reasonable level, Exact Sciences' revenue would have to multiply close to fivefold.

There's no guarantee that Exact Sciences will be able to achieve this growth. It's also possible that less-expensive alternatives to Cologuard will reach the U.S. market.

CellMax Life is one rival hoping to dethrone Exact Sciences. The company developed a circulating tumor cell (CTC) blood test to detect colorectal cancer. CellMax Life initiated a U.S. clinical trial earlier this year. It maintains that if approved, the test will be available for less than $200 -- less than half the current price for Cologuard.

Other companies and organizations are also working to develop liquid biopsies to detect multiple types of cancer from a simple blood test. In January, a team of Johns Hopkins researchers reported promising results for a test that analyzed DNA and proteins in the blood to detect eight types of cancer, including colorectal cancer. Other teams have also made progress in liquid biopsy cancer DNA test research.

Development of such pan-cancer DNA tests is still in the early stages. However, if another company is successful and Exact Sciences isn't, a liquid biopsy that detects several cancer types at an early stage could render Cologuard obsolete practically overnight.

To buy or not to buy

So is Exact Sciences a buy? My view is that the stock should continue to soar over the next few years. Cologuard remains the best alternative to colonoscopies for colon cancer screening. With more payers on board covering the test without requiring patients to foot the bill for copays, Exact Sciences should keep up its winning ways.

Over the longer term, though, I think the future is a lot murkier for Exact Sciences. The company could be a leader in the liquid biopsy market, but it could also be a laggard. My take is that Exact Sciences is still a stock to buy -- but one with which investors need to closely monitor industry developments.