Invitae (NYSE:NVTA) is growing revenue quickly thanks to its acquisition of ArcherDx, which offers tests to determine the best drugs to treat tumors. But the diagnostic testing company is still losing a lot of money. In this video from Motley Fool Live, recorded on Feb. 22, Fool.com contributors Brian Orelli and Keith Speights discuss how Invitae's top-line growth should eventually benefit the company's bottom line.

Brian Orelli: Next up an earnings report from Invitae. Ticker there is NVTA. They had revenue of $100.4 million. That was up 51%. All of 2020 was about $280 million. You can see $100 million in the fourth quarter. They did more than a third of their total revenue for 2020, just the fourth quarter. That's due to the addition of ArcherDx, which they closed right at the beginning of October. ArcherDx is specialized in doing tests to determine the best drugs to use for cancer treatments. Net loss for the quarter was huge at $241 million but that was due, to again, to the ArcherDx closing in the quarter. Adjusted loss was only a $113 million, so there's still not profitable. Revenue -- they're looking for revenue in excess of $450 million in 2021, that will be 61% higher. Then they've guided for a growth of 50% to 60% for the next few years. So ArcherDx is going to add some next year. But we're definitely looking to ramp up sales from ArcherDx as well as their other genetic tests. Any thoughts on the quarter? Do you see a path to profitability here?

Keith Speights: Yeah. Well, first of all, I don't follow Invitae all that closely. But yeah, I do think the company could potentially become profitable over the next several years. As you mentioned, Brian, most of that GAAP loss was related to the acquisition of ArcherDx. From what I see of that acquisition, it looks like a pretty good move for Invitae, I think it was a smart acquisition. If you dig in to their numbers, Invitae has reduced its cash burn by around $20 million from the first quarter of last year through the fourth quarter. That's excluding the impact of the ArcherDx deal. That's good improvement to see a company, like you said, it's unprofitable, but they're trending in the right direction in terms of reducing their cash burn. They have a very strong cash position now, they had a big equity offering in January. Their cash stockpile was very close to $800 million now, so that should carry them for quite a while.

Their market cap is around $9.5 billion or so. Expected sales of $450 million plus. That's a really high price-to-sales ratio. But if the company can do what you were just mentioning, Brian, achieve that goal of 50%, 60% growth over the next few years, that's going to bring that P/S ratio down quite a bit. Make the stock look a lot more attractive. It's I think a company that has a lot of potential, and you probably shouldn't worry too much about this steep valuation at this point because they have so much growth potential.

Orelli: Yeah. That equity raise in January, I think they raised enough to buy ArcherDx and then some. That tells you that the institutional investors that are buying the secondary offering are really behind the company and I think that's a good sign for the future of Invitae.

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