Shares of leading diagnostics platform and cancer-detecting genomic test provider Veracyte (VCYT 0.50%) are up 23% over the last week as of market close Thursday, after the company reported excellent first-quarter earnings earlier in the week. Veracyte's sales grew by 21%, and its earnings per share quadrupled, as its net income margin improved from 6% to 21% year over year. Both of these figures soared past Wall Street's estimates. Management guided for sales growth between 13% and 14% in 2026, with margins remaining robust.
NASDAQ: VCYT
Key Data Points
It was an all-around great quarter for Veracyte, as the company announced:
- its largest product, Decipher (for detecting prostate cancer), grew sales by 24%
- its second-biggest product, Afirma (for thyroid cancer), saw revenue rise 12%
- it readies Prosigna (for breast cancer) for a commercial launch by midyear
- TrueMRD should launch in Q2, with its first indication targeting muscle-invasive bladder cancer
- TrueMRD has over 50 studies in testing, analysis, contracting, or planning across numerous oncologies
Image source: Getty Images.
Overall, Veracyte's Q1 results show that it has not only become one of the first consistently profitable cancer-detection stocks in its niche but is poised to build upon its leadership position, with numerous new products and indications on the way. Noting that Decipher and Afirma hold 33% and 38% market shares in their respective prostate and thyroid cancer-detection niches, Veracyte has become a must-have for physicians. In fact, Veracyte's tests have become the standard of care following their inclusion in the National Comprehensive Cancer Network's guidelines.
Now increasingly cash-generative and home to a net cash balance of nearly $400 million versus a market cap of only $3.3 billion, Veracyte is in an excellent position to continue succeeding far into the future. Whether it makes a tuck-in acquisition or waits out its pipeline of next-gen tests, Veracyte is an intriguing growth stock at 30 times free cash flow (after accounting for stock-based compensation).
I'll be watching Veracyte closely this year and may consider opening a starting position in the company, buying it in thirds over time, and holding it for the long haul.
