It's hard to think of an industry that was more impacted by the 2020 COVID pandemic than diagnostics. The often-overlooked part of the healthcare system sprang into action, testing more than 250 million people last year in the U.S. alone. And interestingly, some testing companies performed well despite having little to do with COVID. Co-Diagnostics (NASDAQ:CODX), Aspira Women's Health (NASDAQ:AWH), Fulgent Genetics (NASDAQ:FLGT), GenMark Diagnostics (NASDAQ:GNMK), and Natera (NASDAQ:NTRA) were the five best-performing diagnostics companies last year among those with a market cap above $200 million. Let's take a look at how they did it and whether the gains could continue this year.

A scientist at a lab bench with computer screens, microscopes and a tray of test tubes and assays.

Image source: Getty Images

1. Co-Diagnostics

Co-Diagnostics led the group with a gain of 939% in 2020. The company's COVID test was authorized by regulators on April 3 and proceeded to fuel revenue to $47.4 million in the first nine months of 2020. That's 444 times the $106,000 of sales it recognized during the same period of 2019. The company's technology enhances the output of PCR tests (the kind that look for genetic material in a sample), virtually eliminating the most common source of false negatives.

Even after all this growth, Co-Diagnostics isn't standing still. The company has begun distributing its combined "ABC" test for influenza A, influenza B, and COVID-19 for research use while navigating the regulatory approval process. The test can detect the flu and the SARS-CoV-2 virus in human saliva without the time-consuming extraction of genetic material. CEO Dwight Egan reiterated the sales momentum in the third-quarter earnings call and suggested the world come to grips with the fact that we will be dealing with COVID until the end of time. If that long-term outlook proves true, as the world learns to better detect and prevent against the disease, Co-Diagnostics shareholders are in for more gains in the years ahead.  

2. Aspira Women's Health

Though it changed its name from Vermillion to Aspira Women's Health in June to better reflect a focus on gynecological health, investors had no trouble finding this company when placing buy orders in 2020. The stock price rose 728% last year, even though revenue for the first nine months of 2020 climbed a mere 2% from 2019.

Aspira's OVA1 test is used, along with imaging results, to detect early stage ovarian cancer. Unlike many other diagnostic companies, Aspira was hindered over the spring and summer by the reduced elective procedures and delayed annual checkups associated with COVID. But by the end of September, test volume had returned to 95% of pre-COVID levels.

The run-up in the stock isn't about a return to normal, though. Instead, investors are excited about the potential for additional products. Aspira is developing tests to detect diseases at an early stage across a woman's entire lifecycle, beginning with endometriosis in young adults. Management believes the total addressable market for these tests could be $1.3 billion to $5.2 billion. That dwarfs its $5 million in sales over the past 12 months.

As of November, the company's deals with insurers give it access to 173 million covered lives in the U.S. -- 51% of the population. If that group breaks down according to U.S. averages, 50.5% of them are women. To fulfill investors' expectations, management will have to continue expanding its product offerings and increase the utilization among that large base of potential customers. 

3. Fulgent Genetics

In supporting the fight against COVID, Fulgent Genetics scaled up like few companies before it have done. Because of the demand for COVID testing, volume grew by an order of magnitude each quarter of 2020, from 13,000 in the first quarter to 180,000 in the second quarter and more than 1 million in the third. That increase shows up in the financials, too -- operating margin over those three quarters has climbed from -25% to begin the year to 63% in the quarter ending Sept. 30. The company's stock jumped 304% during 2020, while revenue for the first nine months of the year grew 425% to $127 million.  

Fulgent's genetic testing was already expanding rapidly heading into last year. Revenue in 2019 was 52% higher than in 2018. Management believes the growth is thanks to differentiation -- its tests can look for more genes than any other diagnostic. Fulgent is able to sequence areas of the genome it believes other labs cannot, incorporating new genes into its testing menu and further expanding customized disease-specific tests. Last year, COVID supercharged a business that was already growing rapidly. This momentum could turn the stock into one of the best of 2021 as well.

4. GenMark Diagnostics

GenMark was awarded an emergency use authorization from the U.S. Food and Drug Administration for its SARS-CoV-2 test on March 19, early in the spread of COVID across the U.S. The company was then awarded $749,000 from the Biomedical Advanced Research and Development Authority (BARDA) to fund the studies that would get it through regulatory approval. That test fueled 100% year-over-year revenue growth through the first nine months of 2020 and shares that gained 204% for the full year.

The company's ePlex platform claims to have an ultra-simple workflow that cuts the time needed to provide results of traditional molecular tests, like a PCR, to less than two hours -- down from six to 24 hours or even more. GenMark's ePlex RP2 test, released in late June, detects 21 common respiratory pathogens including COVID-19.

The pandemic has continued to strengthen the company's position with customers which range from small rural hospitals to large health systems. GenMark had 51 analyzers in operation worldwide at the beginning of 2017. That number grew to 489 by the third quarter of 2019. A year later, there were 722 machines up and running, a 48% increase in the past 12 months. Such growth should persist, as 95% of those 2020 clients signed a multi-year agreement.

5. Natera

Natera offers proprietary genetic testing for reproductive health and cancer, and to determine when a donated organ might be rejected. Through the first nine months of 2020, sales grew 27%, accelerating from 17% year-over-year growth in 2019. Testing volume grew 31% in the third quarter ending Sept. 30 compared to the same period in 2019. That number had hovered consistently at about 20% for two years. The acceleration is just one of the reasons investors bid shares up 195% in 2020.

The company's addressable market may also be expanding. In November, Natera announced a pair of partnerships, one with Pfizer (NYSE:PFE) and one with Novartis (NYSE:NVS), to use its Signatera test to detect early stage breast cancer in clinical trials. The company has more than 50 deals with pharmaceutical companies to use the test that detects cancerous DNA for 15 different diseases including colorectal, lung, and bladder cancer. 

Natera also sponsored a five-year, 20,000-patient study that CEO Steve Chapman believes could add hundreds of millions of dollars to the bottom line by changing the way society and insurers view non-invasive prenatal testing. He expects results of the study to be published in 2021. With so much activity on the horizon, the coming year has the potential to be just as rewarding for shareholders as the last.

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.