What happened

Shares of Guardant Health (NASDAQ:GH) rose nearly 108% last year, according to data provided by S&P Global Market Intelligence. In its first full year on the market, the liquid biopsy specialist easily outperformed the 28.8% gain of the S&P 500 in 2019. 

While the stock suffered from hype and the volatility associated with it, operating results largely support the company's $7.3 billion market valuation. In fact, Guardant Health is growing so quickly that it raised full-year 2019 financial guidance in each of its last four quarterly updates. 

Rising blue and orange stock chart

Image source: Getty Images.

So what

In the first nine months of 2019, the company processed 34,655 tests, which marked a 65% increase from the year-ago period. However, the launch of new tests and reimbursements from Medicare drove a 162% jump in total revenue in that span. That trend should continue in the year ahead. In late December, Guardant Health received expanded Medicare coverage for Guardant360 tests in most major solid tumor cancers.  

While the boost from increased coverage will fade eventually, investors have no reason to think that day is imminent. Growth was actually accelerating during the last quarterly period reported. Guardant Health grew revenue 181% year over year in the third quarter of 2019, compared to growth of 178% in Q2.

The continued momentum forced management to increase full-year 2019 revenue guidance for the fourth straight quarter. As of November, Guardant Health forecast annual revenue of $202 million to $207 million, compared to just $130 million to $135 million expected at the time initial guidance was announced. 

Now what

Guardant Health is crushing the early opportunity in liquid biopsies, but the market is still in its infancy. The company is ramping sales of Guardant360 and GuardantOMNI tests today, but it's also developing the Lunar-1 and Lunar-2 tests for tomorrow. The latter require more extensive data processing and more sensitive tools, but are designed to be used for early cancer detection in larger populations. If the company can successfully develop those tests and hold its own in an increasingly competitive market, then long-term shareholders should be handsomely rewarded this decade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.