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Fulgent Genetics Stock: Buy at the High?

By Cory Renauer - Dec 29, 2020 at 6:37AM

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Could this genetic testing provider turn its coronavirus bump into long-term share price growth?

Shares of Fulgent Genetics ( FLGT 0.62% ) have been hovering near their all-time high after a big jump this summer. After rising around 231% year to date, can this coronavirus stock put up additional big gains for investors?

The relatively young diagnostics company owes its recent success to its quick development of coronavirus tests, including an at-home service the FDA authorized in June. Fulgent's Picture Genetics business is selling so many at-home sample-collection kits that the company expects at least $300 million in total revenue this year.

Person with a computer.

Image source: Getty Images.

Management's most recent prediction for full-year revenue forecasts an 800% year-over-year gain, and that surge could extend through the end of 2021. Once the availability of effective COVID-19 vaccines catches up with demand, though, this company will have to fall back on its pre-pandemic revenue streams, which haven't been growing as quickly.

Fulgent Genetics' market cap has been hovering above $1 billion over the past few months. That's a lot for a company expected to earn between $200 million and $300 million in 2021, then relatively little in subsequent years.

Why you should buy Fulgent Genetics now

The company's proven ability to rapidly scale up its operation into one that can run millions of tests annually and earn an impressive profit makes this a stock to buy now and hold for the long run. 

In 2019, Fulgent Genetics' operations nearly broke even by selling around 59,000 tests of the variety that generally help people learn about their genetic health risks. The company's internal costs averaged $241 per test that year, which allowed it to operate while offering reasonable prices to customers.

Economies of scale pushed internal costs all the way down to $31 per test in the first nine months of 2021. That's low enough to position it to compete fiercely with any competitor in this space.

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.

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