Please ensure Javascript is enabled for purposes of website accessibility

Could Guardant Health Be a Millionaire-Maker Stock?

By Keith Speights – Feb 2, 2020 at 9:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's liquid biopsies could change the way cancer is diagnosed. And make investors rich along the way.

For 17 years, a popular TV game show asked a question that was easy to answer. The question was in the game show's name itself: Who Wants to Be a Millionaire? Obviously, the answer to the question is "pretty much everyone." The hard part was answering the show's other questions. It took 12 correct answers to win the $1 million prize.

Are there easier ways to become a millionaire? Sure. Buying the right stock and holding it for enough time can amass a fortune for patient investors. The trick is finding that right stock.

There are plenty of stocks that are pretty good candidates. One that I really like is Guardant Health (GH -6.73%). But could Guardant Health actually be a millionaire-maker?

Man smiling as money rains down

Image source: Getty Images.

A fantastic growth story so far

Guardant Health's growth since its initial public offering (IPO) in October 2018 has already made some investors a lot of money. The IPO price was $19 per share. Guardant Health soared 46% right out of the gate and is now up more than 300% in just 16 months. 

The company's revenue has increased at an impressive rate as well, soaring by a compound annual growth rate (CAGR) of more than 100%. What's fueling Guardant Health's success? Liquid biopsies.

If you're not familiar with liquid biopsies, they're tests that can detect cancer by identifying DNA fragments from tumor cells in the blood. In many cases, a diagnosis of cancer requires a tissue biopsy, which usually involves a surgical procedure. Liquid biopsies are easier, safer, and cheaper than tissue biopsies. 

Guardant Health currently markets two liquid biopsy products. Guardant360 helps match advanced-stage cancer patients with the most effective treatment. It's approved for reimbursement for over 170 million Americans. GuardantOmni is used by biotechs and pharmaceutical companies to screen patients for clinical studies evaluating cancer drugs. 

Over 60 drugmakers use Guardant Health's liquid biopsies. Two of them -- AstraZeneca and Amgen -- have partnered with the company to develop companion diagnostics using Guardant360.  

Ginormous opportunities

There are several near-term catalysts for Guardant Health. A Medicare local coverage determination (LCD) is expected by February that will allow Medicare contractors across the U.S. to expand Medicare coverage for Guardant360 to the majority of solid tumors. That could set the stage for private insurers to approve coverage for the liquid biopsy as a pan-cancer test.

The company also awaits FDA approval of Guardant360. Guardant Health thinks that this approval will lead to a Medicare national coverage determination (NCD), which would standardize reimbursement for the liquid biopsy for all Medicare beneficiaries.

Guardant360 alone has an addressable market of $6 billion. And that's just in the U.S. Guardant Health plans to expand into international markets in the future.

But the biggest opportunity for the company lies with another product -- its Lunar liquid biopsy products. The Lunar-1 test is designed for cancer recurrence monitoring, while Lunar-2 targets cancer screening and early detection. These products are only available for research use right now. Not too far down the road, though, Guardant Health thinks that Lunar-1 could reach a market of $15 billion per year with Lunar-2 knocking on the door of an annual market opportunity of over $30 billion.

Millionaire-maker?

As is the case with TV game shows, jumping through the hoops required for healthcare stocks to win is easier said than done. Guardant Health has a long way to go.

It also has competition. Several other companies are developing liquid biopsies, including Exact Sciences, Illumina spin-off Grail, and Thermo Fisher Scientific. That $50 billion-plus total addressable market could be split several ways.

Still, Guardant Health enjoys a head start right now. With a market cap of only $7.4 billion, the stock should have a lot of room to run if the company can capture a significant share of the potential market.

I wouldn't go so far as to claim that Guardant Health is a shoo-in to be a millionaire-maker stock. However, I do think it should make investors a lot of money over the next decade. And they won't have to know the answers to questions about trivia.

Keith Speights owns shares of Guardant Health and Illumina. The Motley Fool owns shares of and recommends Guardant Health and Illumina. The Motley Fool recommends Amgen and Exact Sciences. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Guardant Health, Inc. Stock Quote
Guardant Health, Inc.
GH
$55.75 (-6.73%) $-4.02
AstraZeneca PLC Stock Quote
AstraZeneca PLC
AZN
$55.40 (0.89%) $0.49
Amgen Inc. Stock Quote
Amgen Inc.
AMGN
$229.03 (-0.83%) $-1.91
Illumina Stock Quote
Illumina
ILMN
$206.18 (-3.07%) $-6.54
Thermo Fisher Scientific Stock Quote
Thermo Fisher Scientific
TMO
$523.61 (-3.14%) $-16.98
Exact Sciences Stock Quote
Exact Sciences
EXAS
$33.82 (-6.88%) $-2.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
338%
 
S&P 500 Returns
108%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/07/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.