What happened
Shares of Guardant Health (GH -5.19%) rose over 17% last month, according to data from S&P Global Market Intelligence. The stock returned to a positive trajectory after the liquid biopsy pioneer reported solid first-quarter 2019 operating results in early May. Management wisely took advantage of the soaring stock price through a public offering of common stock at the end of the month, which raised over $319.5 million in gross proceeds.
Not even that could stop the stock's rise. Shares rose another 14% in the first three days of June after the stock offering closed, meaning the stock has gained 33% since the beginning of May. Perhaps investors are excited about Guardant Health's massive war chest, which stood at $466 million in cash, cash equivalents, and short-term marketable securities at the end of March.
Image source: Getty Images.
So what
The business is firing on all cylinders right now. Revenue increased 119% from the year-ago period, operating loss stood at a manageable $23.6 million, and only $4.3 million in cash was burned from operating activities. Couple that with a steady stream of good news from clinical studies, and it's easy to see why investors are increasingly optimistic about Guardant Health's future.
|
Metric |
Q1 2019 |
Q1 2018 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$36.6 million |
$16.7 million |
119% |
|
Gross profit |
$23.1 million |
$7.4 million |
210% |
|
Operating income |
($23.6 million) |
($18.6 million) |
N/A |
|
Net income |
($21.3 million) |
($13.8 million) |
N/A |
|
Operating cash flow |
($4.3 million) |
($6.6 million) |
N/A |
Data source: SEC filing.
Surging revenue is leading to quickly expanding gross margin. If the promising trajectory remains intact, then the business should be able to deliver comfortable operating margins in the not-too-distant future. The strong start to the year also forced management to increase full-year 2019 revenue guidance to a range of $145 million to $155 million, which would represent growth of 63% at the midpoint compared with last year.
Now what
Investors with a long-term mindset have certainly been rewarded for building a position in Guardant Health since its debut on the public markets. That said, as the sudden surge in March and ensuing collapse in April demonstrates, it might be best to spread purchases of the stock out over several months (or years) to smooth out the volatile reactions of Mr. Market.
