DNA's structure wasn't discovered until 1953. The human genome -- the complete set of DNA sequences in the human body -- wasn't fully sequenced until 50 years later. Fast-forward to today, and we're still only in the early stages of genetic research.

Several companies are already generating significant revenue by focusing on genetic research. Two that especially stand out are Illumina (NASDAQ:ILMN) and Guardant Health (NASDAQ:GH). Illumina dominates the gene-sequencing market, while Guardant Health is a fast-rising star in developing blood tests that detect DNA fragments of cancer cells. Which of these two stocks is the better choice for investors to profit over the long run from the continued advances in unlocking the power of DNA?

Test tubes with image of DNA helix inside one test tube

Image source: Getty Images.

The case for Illumina

The key to unleashing the opportunities from DNA is to first map the sequence of the chemical base pairs in DNA. No company has had a bigger role in this sequencing than Illumina. The company's systems were instrumental in reducing the cost for sequencing a human genome from over $10 million just 13 years ago to around $1,000 today.

What's even more exciting, though, is what Illumina could do in the future. The company believes that its NovaSeq platform should eventually enable human genomes to be mapped for around $100. This would open up the world of gene sequencing to organizations that can't afford to use the technology now.

Perhaps the biggest opportunity for Illumina's systems is in cancer research and treatment. Illumina CEO Francis deSouza recently stated that "it is increasingly clear that genomic information will transform the standard of care for oncology patients." Illumina is already at the forefront in enabling researchers to identify the genetic links to cancer and to help determine the most appropriate therapies for cancer patients.

The company also stands to grow as more countries initiate population genomics efforts to sequence the genomes of hundreds of thousands of people. Illumina's technology is being used in several of the early population genomics projects across the world. Other growth drivers for Illumina include research into rare and undiagnosed diseases, consumer genomics such as products offered by Ancestry and 23andMe, and non-invasive prenatal testing (NIPT).

Illumina is in a great financial position to sustain its leadership in gene sequencing innovation. The company generated over $3.3 billion in revenue last year with a profit of $826 million. Wall Street analysts expect Illumina to deliver average annual earnings growth of nearly 16% over the next five years.

The company is also hoping to close on its acquisition of Pacific Biosciences of California by the end of this year. This deal would give Illumina a top spot in the long read gene sequencing market, which is more costly than Illumina's specialty of short read gene sequencing but can map some parts of the genome that short reads can't. 

The case for Guardant Health

Liquid biopsy is something of a holy grail in cancer detection. Biopsies involving tissue samples frequently require invasive procedures and are usually done only when cancer is already suspected in a patient. Liquid biopsies, though, are simple blood tests that hold the potential to detect cancer at early stages.

Guardant Health ranks as a leader in the development of liquid biopsy products. The company's Guardant360 liquid biopsy is used to determine the appropriate therapy for patients with advanced-stage cancer. GuardantOmni is another liquid biopsy that biopharmaceutical companies use to screen patients for clinical studies evaluating cancer drugs.

These two products, especially Guardant360, have fueled Guardant Health's meteoric revenue growth. The company reported 178% year-over-year revenue growth in its latest quarter. Guardant360 has now been used for over 100,000 patients by more than 6,000 oncologists.

Earlier this year, Guardant Health announced the availability of its Lunar DNA assays for research use only. These tests are focused on early stage cancer detection and identifying the recurrence of cancer.

The addressable U.S. market for Guardant360 and GuardantOmni is around $6 billion per year. This alone represents a tremendous opportunity for Guardant Health. But the potential market for the company's Lunar assays is much larger -- over $45 billion.

Other companies are racing to compete in the liquid biopsy market as well, though. Some of these rivals have deeper pockets than Guardant Health, which isn't yet profitable. However, Guardant Health's early lead puts it in a good position for long-term success.

Better buy

Successful investing in healthcare stocks requires a careful examination of companies' growth prospects, financial positions, and competitive landscapes. I think that both Illumina and Guardant Health are in reasonably good shape on all three fronts.

As an up-and-coming company, Guardant Health's growth prospects appear to be greater than Illumina's. On the other hand, Illumina's financial position is significantly better than Guardant Health's. Both companies face competition, but Illumina's current market dominance gives it a stronger moat.

I think that which stock is the better choice boils down to your investing style. More aggressive investors will probably prefer Guardant Health, while less aggressive investors would be better off with Illumina. I like (and own) Guardant Health and Illumina. My view is to pick both of them.