Buying companies with proven products or services that are operating in thriving industries is a must for growth investors. Genetic testing is one such industry. There has been an increase awareness and interest in testing for genetic disorders and cancers. That's why Allied Market Research predicts that the genetic testing industry will grow at a 10.1% annual rate, reaching $21.3 billion by 2027.

With a $1.9 billion market capitalization, Veracyte (VCYT 3.58%) is a lesser-known name in the industry. The company leverages genomic technology to help physicians more confidently diagnose and treat chronic conditions. The thought is that this will lead to better treatment outcomes for patients. The company's tests are used to diagnose and guide treatment decisions for conditions like lung cancer, prostate and bladder cancers, thyroid cancer, breast cancer, and colon cancer.

Here are three reasons why growth investors may want to familiarize themselves with the medical diagnostic company and consider buying its shares.

1. Robust top-line growth in the first quarter

Veracyte reported $67.8 million in revenue for the first quarter ended March 31, up 84.7% from the year-ago period. This was much higher than the $62 million that analysts were expecting in the quarter. So how did the genetic test maker exceed analysts' predictions for the 10th quarter out of the last 10 quarters?

Testing revenue of $56 million in the first quarter accounted for the vast majority of Veracyte's total, and it was up 69.2% year over year. The deferral of diagnostic tests in past quarters acted as a coiled spring for the company in the first quarter. This explains how its test volumes soared 61% higher over the year-ago period to 23,245 during the quarter.

Veracyte's biopharmaceutical and other revenue surged to $8.8 million in the first quarter. This was much higher than the $0.6 million in revenue recognized for the first quarter of the prior year, which was due to contributions from the acquisition of the immuno-oncology company HalioDx last August. Meanwhile, product volume for Veracyte's ProSigna breast cancer tests dropped 2.6% year-over-year to $3 million for the first quarter. Minimal test volume growth was more than neutralized by a 5% currency headwind during the quarter.

As pent-up demand for its products wanes, Veracyte expects that revenue growth will significantly moderate in the remaining three quarters of the year. The pent-up demand stems from less diagnostic tests being performed in the early days of the COVID-19 pandemic. Now that deferred diagnostic tests are finally being completed, there will be less of a demand going forward.

Even so, the company is forecasting $270 million in midpoint revenue for the year. This equates to a 23% growth rate over 2021. And analysts believe that growth will remain just as strong in 2023 at 19%.

A doctor explains test results to a patient.

Image source: Getty Images.

2. A balance sheet loaded with cash and little debt

Another important reason why analysts are optimistic about Veracyte's future prospects has to do with the company's rock-solid balance sheet. Veracyte boasts a $163.6 million cash balance against $1.1 million long-term debt. Thus, the company is sitting on a net cash balance of $162.5 million, which is equivalent to over 8% of its market capitalization. This should give Veracyte the funds necessary to execute bolt-on acquisitions and future product launches.

3. The valuation is enticing

Since Veracyte is more focused on revenue growth than profitability, the price-to-earnings ratio would be of no use in valuing the stock. That's why I would argue that the price-to-sales (P/S) ratio is more appropriate for Veracyte -- and currently it is trading at a multiple of seven. Considering that Veracyte is growing at a rate of around 20% annually, this is arguably a solid entry point for growth investors.