Shares of diagnostic testing company Fulgent Genetics (FLGT 5.15%) were up 93% last year, according to S&P Global Market Intelligence. The unpredictability of COVID took shareholders on a journey through several peaks and valleys on the way to that gain. The roller coaster has continued into 2022 with the stock down nearly 20% year to date already.
Much of the volatility can be blamed on the waves of coronavirus infections. Naturally, the need for testing rises and falls with cases. Management raised its full-year guidance when it reported first-quarter results. It followed that by retracting the projected increase after the second quarter. In the most recent report, guidance rocketed higher once again. That's enough to give any analyst whiplash.
All told, Fulgent administered almost 11 million billable tests between October 2020 and September 2021. According to company guidance, the result will be year-over-year revenue and earnings-per-share growth of 121% and 64%, respectively, for 2021.
Meanwhile, Fulgent's smaller core business keeps growing. It has used some of the $570 million in trailing-12-month earnings to expand its offerings and international exposure. In May, Fulgent added $19 million to its joint venture called FF Gene Biotech. The Chinese entity was formed in 2017.
It followed that by announcing a partnership with Helio Health -- a maker of blood-based diagnostics for early cancer detection. In November, the companies released positive data for a test to detect liver cancer. That test is currently in clinical trials both in the U.S. and China.
Finally, Fulgent acquired CSI Laboratories, a deal that helps it enter the market for testing tumors and cancer cells after a patient has been diagnosed. CSI Laboratories comes with the benefit of existing relationships with insurers, something Fulgent CEO Ming Hsieh has talked extensively about. Leveraging those relationships could accelerate the pace of growth for Fulgent's core genetic testing business.
That core segment posted revenue of $36.5 million in 2020 and will produce an estimated $115 million in 2021. Although those sales pale in comparison with the COVID business, the growth and potential make it harder to dismiss Fulgent's dirt-cheap valuation as simply the result of unsustainable COVID revenue. And shares are dirt cheap.
Before the pandemic, Fulgent had traded with a price-to-sales (P/S) ratio as low as 2.7. The current $2.4 billion market capitalization is only 2.6 times management's estimated $930 million in 2021 revenue. Of course, Fulgent is also producing a lot of profit. If you remove the $470 million in cash the company had on its balance sheet as of Sept. 30, shares are now trading at only 4.3 times what management says it will earn for 2021. It's rare to find a stock trading that cheap.
A skeptic might say 2021 sales are significantly higher thanks to testing for the SARS-CoV-2 virus. And that number could fall off dramatically if the virus, or the desire to test for it, wanes. That's true. However, the continued growth of its core business should give investors the confidence to focus on Fulgent's long-term efforts to be a bigger part of the genetic testing industry.