Shares of Exact Sciences (NASDAQ:EXAS) have soared 129% since the beginning of last April, but investors want to know if this stock rocket has any more gas in the tank.

A recently successful debt offering says a lot of investors believe this stock will soar much further. Here are three reasons they're probably right.

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Someone else has to pay for it

There are plenty of companies advancing their own versions of a non-invasive colorectal cancer screen, but Cologuard is the only one American adults over 50 can get their insurers to pay for without an argument every time. That's important, because getting adults to take a cancer test when they feel just fine is already a challenge. Thanks to the Affordable Care Act, insurers aren't allowed to send you a bill for recommended preventative services. 

The FDA approved Exact Sciences' only test in 2014, but Cologuard sales didn't begin taking flight until the U.S. Preventative Services Task Force updated its colorectal screening guidelines to include an exam like Cologuard every three years for adults between 50 and 75. Thanks to the update, Medicare reimburses Exact Sciences $508.87 once the test is completed by patients 65 and older, which is the median price paid among private insurers. 

Room to grow

The American Cancer Society expects 145,600 new cases of colorectal cancer in 2019, which puts the lifetime risk of developing colorectal cancer at 4.15% for women and 4.49% for men. Five-year survival rates are around 90% when caught in an early pre-symptomatic stage but fall to around 15% once the disease becomes serious enough to cause discomfort. 

Without regular screenings, few patients realize there's a problem until it's too late, but that's beginning to change. Exact Sciences thinks about half of all new Cologuard users hadn't been screened for colorectal cancer yet. There are around 85 million people of average risk between 50 and 85, and reaching just one-third of them could lead to $4.7 billion in top-line sales. 

Cologuard's share of its addressable patient population reached just 4% at the end of 2018, and there's a good chance this population will grow again soon. The American Cancer Society recommends beginning regular colorectal cancer screenings at age 45, which could raise the number of addressable patients to around 104 million.  

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Pfizer partnership

Exact Sciences was doing a pretty good job of marketing Cologuard on its own, but a partnership with Pfizer (NYSE:PFE) will go a long way toward reaching a larger share of its potential patient base.

Last August, Pfizer agreed to help promote Cologuard and provide operational support to Exact Sciences' sales team. Pfizer didn't become America's largest pharmaceutical company without learning a thing or two about how to market products to doctors and potential patients.

When it comes to direct-to-consumer television ads that inspire patients to ask their doctors about expensive drugs, Pfizer markets four of the industry's 10 most advertised brands. Selling a cancer screen introduced a new twist for Pfizer's salesforce, but the tie-up is already producing results. Exact Sciences completed 292,000 Cologuard tests during the fourth quarter, which was 20% more than the previous quarter and 66% more than the previous-year period.

Looking ahead

At recent prices, Exact Sciences is an $11.6 billion company that told investors to expect $720 million in total revenue this year. In the diagnostics industry, a price 16.1 times forward sales estimates is pretty amazing. For comparison, Quest Diagnostics is one of the largest providers of diagnostic services in the country, and its stock trades at 1.5 times forward sales at the moment.

Exact Sciences can support such a high valuation as long as it's the only non-invasive colorectal cancer test. New tests from companies like Guardant Health that look for fragments of DNA in a blood sample are pretty good at informing doctors about tumors they already know exist, but screening healthy people for early-stage cancer is a lot more challenging, so Guardant is years away from becoming a direct competitor.

With its niche sewn up for the foreseeable future, Exact Sciences expects revenue to jump 58.5% this year. 

EXAS Revenue (Quarterly) Chart

EXAS Revenue (Quarterly) data by YCharts

Watch the bottom line

Without any competition in its niche, there's a good chance Exact Sciences will continue growing fast enough to provide market-beating gains despite its nosebleed valuation. That said, it's important to realize the company's still losing money thanks to operating expenses that continue rising as fast as revenue. 

Exact Sciences raised its headcount by 59% last year, which sent personnel expenses soaring to $60.3 million. In 2019, the company also ramped up its advertising budget by 69% to $127 million. If operating expenses continue rising too quickly, analysts worried they'll never see any earnings will slowly but surely revise their outlooks downward. There's a good chance this stock can rise above its all-time high, but investors should tread lightly until Exact Sciences is clearly on a path to positive cash flows.