There's been a lot of hype around recent IPO Snowflake (NYSE:SNOW), and much of that is deserved. The cloud-data company has been consistently growing sales ever since its founding in 2012, logging 115% year-over-year revenue growth in the latest quarter.

Contrast Snowflake's headline-grabbing journey with that of a small diagnostics company that entered 2020 as an off-the-radar stock not expecting to get anyone's attention. Fast-forward a year and this business is now leveraging a patented approach to meet the demand for COVID testing, generating so much growth it makes the hot tech IPO look like it's standing still. In the fight against the SARS-CoV-2 virus, Co-Diagnostics' (NASDAQ:CODX) revenue through the first nine months of 2020 was more than 44,000% greater than in the same period of 2019. Not surprisingly, shares were up 940% last year. Even after that incredible rise, the stock may offer significantly more upside in the years ahead than high-profile IPOs like Snowflake.

A line showing exponential growth with wooden blocks with percent signs in them marking points along the line.

Image source: Getty Images.

Acceleration of a trend

Co-Diagnostics was founded seven years ago by its current chief science officer. The company received a patent in 2018 for the application of its CoPrimers technology to enhance the output of PCR molecular tests, which detect the genetic material of a virus. Management claims the approach is 2.5 million times more effective than competing technologies at reducing amplification errors when distinguishing between viruses, cancers, or other pathogens. In August, the company received additional patent protection for the structure of the CoPrimers molecule itself, to go along with the protected applications.

Like most companies helping identify infections, Co-Diagnostics experienced a significant increase in demand last year. The company received an emergency use authorization (EUA) from the U.S. Food and Drug Administration for its COVID-19 test kits on April 3, and management expects full-year sales for 2020 to come in between $73.4 million and $74.6 million -- an amazing 336 times the number for 2019. Although the pandemic is obviously responsible for the bulk of the growth, those 2019 sales were still five times greater than the $40,000 the company generated in 2018. The company was growing fast -- albeit from a tiny base -- even before anyone was ever tested for COVID-19.

Investing is all about the future

Geography and technology could play a significant role in Co-Diagnostics' performance going forward. First, the company's joint venture in India offers a significant path for growth. The unit generated $3 million in sales in the third quarter of 2019 and has received regulatory approval for the COVID-19 test in India, as well as for tests that detect tuberculosis, malaria, hepatitis B and C, and human papillomavirus. In Europe, the company received a CE marking for its "ABC" test, which detects influenza A and B as well as COVID-19. That clears it to be marketed and sold in 33 European countries, including all members of the EU. 

Back in the U.S., partner Clinical Reference Laboratory has been selling an at-home, saliva-based COVID-19 test since August that relies on Co-Diagnostics technology. Co-Diagnostics is continuing to advance the saliva-based testing approach, most recently with a whitepaper showing its CoPrimers technology can be used to detect COVID-19 in saliva without extraction of genetic material. If it can bring a product to market, it would join organizations like Labcorp (NYSE:LH), BioGX, and the Yale School of Public Health  that have received emergency use authorization for extraction-free tests. Not having to extract the genetic material significantly reduces the required amount of reagent and processing time -- both bottlenecks -- compared with previous saliva tests. Management hasn't indicated when products with the capability might be available.

The company is also adapting quickly as the virus progresses, recently announcing it had completed a design for a test to identify several mutations in the more transmissible variant of the SARS-CoV-2 virus referred to as VUI 202012/01. No indication was given on commercial availability for that test, either.  

There's more here than coronavirus tests

Even before 2020, Co-Diagnostics was making strides in both agricultural applications and liquid biopsy tests. In agriculture, the company launched products to detect deadly diseases carried by mosquito populations and was highlighted by Bayer (OTC:BAYR.Y) at an international agriculture conference after that company used CoPrimers technology to identify multiple DNA sequences simultaneously. In humans, the company's approach was shown to detect cancer mutations in blood, opening the potential for a cancer detection test in asymptomatic people. However, while the company has increased resources to support applications of liquid biopsy in agriculture, applications in humans do not appear to be a priority. That may be a smart strategy, given that the field of cancer detection is crowded with well-financed competitors including Guardant Health (NASDAQ:GH), Grail -- the company Illumina (NASDAQ:ILMN) spun off in 2016 only to buy back in 2020 when it filed to go public -- and Exact Sciences (NASDAQ:EXAS). The better path for the company may be to license its technology to others or be acquired by one of the larger companies in the space.

Overall, Co-Diagnostics is a rapidly growing company with a steady base of business from COVID-19 testing for the foreseeable future, and a patented technological advantage that differentiates its products. With only $74 million in 2020 sales, and the COVID-19 testing and liquid biopsy markets expected to be worth roughly $8 billion and $5 billion by 2027, respectively, the company is small enough to keep growing for the next few years without drawing much attention from larger competitors.

A revenue jump of 44,000% won't happen again, but the company has momentum for continued gains in the stock price if it can get products launched. With a market cap of only $283 million, Co-Diagnostics would have to get 86 times bigger just to be the size of Exact Sciences. Investors willing to take a risk on a small but well-positioned company should consider buying shares for the potential.

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.