Bionano Genomics (NASDAQ:BNGO) has certainly created a buzz in 2021. It's one of the top 100 most-popular stocks on Robinhood. Bionano's shares have skyrocketed more than 340% so far this year. 

With such a massive gain in such a short period, it's natural for investors to wonder if perhaps they've missed the boat. Is it too late to buy Bionano Genomics stock? Let's look at the arguments on both sides of the question.

DNA double helix in front of a digital image of a person's head with 1s and 0s in the background

Image source: Getty Images.

Yes, it's too late

Some might argue that all you have to do is to look at Bionano's stock chart to see it's too late to jump on the bandwagon. The healthcare stock is down 13% from its peak set last week. I don't agree with this take, though. It's quite possible that we're only seeing a temporary pullback. 

However, there is a case to be made that Bionano's valuation has reached an unjustifiable level. The company's market cap is currently close to $3.5 billion. Bionano generated a grand total of $4.5 million in the first three quarters of 2020. The consensus Wall Street estimate is for the company to pull in around $8 million for the full year. That would give Bionano a price-to-sales (P/S) multiple of over 437.

The picture gets even worse when you look at Bionano's growth. Sales aren't headed in the right direction. In the third quarter (the latest reported quarter for the company), Bionano's revenue sank nearly 34% year over year. 

Sure, analysts think the company will probably turn things around. But they're only projecting revenue this year of around $18 million. The most optimistic analyst covering the stock estimates 2021 revenue of $19.3 million. That would lower Bionano's P/S multiple to 181, still an absolute nosebleed level.

No, there's more room to run

The primary argument that it's not too late to buy Bionano stock focuses on the long-term prospects. And those prospects could be outstanding.

The company's technology is impressive. Its Sapphire genetic sequencing system can detect large structural variations that others can't. Sapphire looks at variations in up to millions of DNA base pairs, a capability that is crucial in researching some diseases.

The company is pretty much in a league of its own in its niche market of digital cytogenetics (the detection of genetic disorders by analyzing the differences in chromosomes). Bionano estimates that its market opportunity is between $2.6 billion and $3.8 billion annually. 

Let's assume that Bionano manages to attain the lower end of that range. The average P/S ratio for the biotechnology industry is around eight. Based on that multiple, it's possible that Bionano could be worth more than $20 billion if it can capture a big chunk of its addressable market. That's a lot of room to run.

My view

I've mentioned in the past that I really like Bionano's technology. And I think there's another reason the stock could move higher over the short term: The short interest in Bionano has increased. Any good news from the company could fuel a nice short squeeze.

But it's concerning to me that Bionano's current valuation represents more than 90% of what the company estimates as the upper bounds of its addressable opportunity. Sure, the average P/S ratio for the biotechnology industry is eight. But that multiple is so high because the stocks have tremendous room to grow. Bionano's share price already has much of its potential growth baked in.

I'd like to see Bionano demonstrate that it can generate strong revenue growth. It would also be great if the company expanded its total addressable market through innovations and acquisitions. My view is that it might actually be too early to buy Bionano stock.

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.