Investing in cancer-fighting treatments and testing can make for a solid long-term strategy. Cancer, unfortunately, remains a big challenge for the healthcare industry, and detecting it in its early stages can play a key part in helping patients beat the prognosis.
Exact Sciences (EXAS 2.38%) is one of the companies capitalizing on those opportunities. Its Cologuard test screens for colorectal cancer and has helped the company generate significant sales growth along the way. The business is promising and the company also has other tests which help screen for breast cancer and liver cancer.
Could investing in this healthcare stock today help you become a millionaire in the future? Let's find out.
The growth potential is there
Globally, the cancer diagnostics market was worth $172.3 billion in 2022, according to analysts from Grand View Research. And by 2030, they project that will rise to $293.5 billion, averaging a compound annual growth rate (CAGR) of 6.9% until then. In China, the CAGR is expected to be even higher, at 11.3%.
U.S. President Joe Biden launched the Cancer Moonshot in 2016 (while vice president) and reignited it in 2022. The program has a goal of cutting cancer deaths in half over the next 25 years. One of the things the president highlighted as a priority was to do more testing and screening of cancer. The government's focus on such an important initiative can help generate funding and create incentives for companies like Exact Sciences, which can play an important role in keeping cancer-related deaths down.
Achieving some impressive results
Exact Sciences has already done well in growing its business. Sales of $1.8 billion in 2021 were double what the company generated in 2019 ($876 million). And when it reported its earnings results from the third quarter (which ended Sept. 30) in November 2022, it continued to post some strong sales growth, particularly in screening revenue from Cologuard:
Source: Exact Sciences Q3 earnings presentation.
That growth is likely to continue as the number of healthcare providers using Cologuard has been steadily increasing:
Source: Exact Sciences Q3 earnings presentation.
The growth potential is certainly there for Exact Sciences. But the biggest problem for investors today is that the bottom line hasn't been all that strong.
Exact Sciences remains unprofitable
While Exact Sciences has been growing, the company is only projecting profitability based on adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by the third quarter of fiscal 2023, roughly a year away. Although that's encouraging, it still isn't true accounting profitability.
EXAS Net Income (Quarterly) data by YCharts.
A promising investment?
Exact Sciences does have the potential to be a millionaire-making investment, given the long-term opportunities in cancer testing and screening. But for many people, it may still be too risky to invest in right now given its lack of profitability. What is encouraging, however, is that with gross margins of over 70%, getting to breakeven could be attainable with enough sales growth in the future.
Exact Sciences shares fell 36% last year. If you're comfortable with what may be a bumpy road ahead, then this could be a good long-term investment.
