Shares of Fulgent Genetics (FLGT 0.64%) sank 36.5% amid turbulent trading for the broader market in January, according to data from S&P Global Market Intelligence. Both the S&P 500 and the Nasdaq Composite indexes entered into correction territory amid mounting macroeconomic pressures last month, and the indexes closed out the period down roughly 5.3% and 9%, respectively.
Even after some massive pullbacks recently, Fulgent stock is still up roughly 1,470% over the last three years. The company's incredible stock gains and somewhat uncertain outlook set the stage for a big valuation pullback as investors became more cautious last month.
Fulgent's core business revolves around genetic testing, but the company has enjoyed surging sales and earnings thanks to its success at quickly bringing COVID-19 tests to market. With the business getting such a massive boost from COVID-19 testing, investors have been trying to figure out how to value the company going forward, and it looks like the stock could be poised for more volatile swings in the near term.
Fulgent Genetics stock has regained a bit of ground early in February's trading. The company's share price is up roughly 1% in the month so far.
Fulgent is guiding for revenue of roughly $189 million and cost of revenue of $32 million in the fourth quarter. For the full-year period, management expects sales of $930 million, cost of revenue of $115 million, and non-GAAP (adjusted) net income of $16 per share. Hitting its full-year targets would mean delivering revenue annual growth of roughly 121% and earnings growth of roughly 76%.
Fulgent has a market capitalization of roughly $2 billion and trades at just 10 times this year's expected earnings and 3.3 times expected sales. Those are almost staggeringly low multiples for a company that has continued to grow revenue and profit at such an incredible clip recently, but the market doesn't think that the company will be able to keep it up.
Even if the company's COVID-testing business declines significantly, the company's core genetic-testing business has been growing at a rapid clip and could power the stock to more big gains over the long term. However, investors will have to keep the somewhat uncertain outlook in mind and weigh it against their personal risk tolerance.