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Why Veracyte Inc. Shares Stormed Higher

By Sean Williams – Nov 26, 2013 at 1:30PM

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Veracyte shares get a free pass after reporting its third-quarter earnings results.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Veracyte (VCYT 2.45%), a recently IPO'd molecular diagnostics company, jumped as much as 15% after reporting its third-quarter earnings results last night.

So what: For the quarter, revenue improved 74% to $5.6 million from the year-ago period thanks to improved orders of its Afirma Thyroid FNA Analysis (a thyroid biopsy device) to which it received 12,417 samples for the period. Net loss widened from the previous year to $6.3 million from $4.9 million as operating expenses increased 43%; however, a larger number of shares outstanding shrank its GAAP loss down to $6.59 per share from $7.49 in the year prior. Being such a newly public company, there were no analyst estimates to compare its results against.

Now what: It looks as if investors are going to give Veracyte the "welcome to Wall Street" treatment and ignore its hefty loss in favor of its rapidly growing revenue stream. Furthermore, comments from Veracyte's CEO, Bonnie Anderson, would suggest that growing acceptance of its Afirma GEC by insurers in terms of coverage should help boost sales over the near-term. While I am exciting by the practical application of its molecular diagnostic device, I'd like to see Veracyte get a bit closer to profitability, or diversify its product line with additional devices and/or indications, before I'd consider this as a serious investment.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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