Fulgent Genetics Stock Forecast: Investing in genetics stocks and genome processing may sound like the next frontier, but this industry could be the next big thing.
This science technology is the basis for a new type of medicine called “precision healthcare.” It lets doctors customize prescribed treatments based on the individual genetics of each patient. Genetics can help better target cancers or be more effective in treating certain issues.
However, the industry is also very young and that makes it unpredictable.
While the technology itself is bound to be useful, there is no guarantee that a particular organization is going to hit it big on the basis of genetics.
Before you invest in a genetics company, carefully evaluate whether you believe the business in question has the chops to handle massive success. Examine the company’s strengths and opportunities as well as its weaknesses and the risk factors to its success so that you can make an informed decision.
Let’s take a closer look at Fulgent Genetics [NASDAQ: FLGT].
What Does Fulgent Genetics Do?
Fulgent Genetics is a genetics testing company. Since 2011, it has focused on providing wide-ranging tests at an affordable price.
Many of these tests were developed to meet the needs of their physician clients but it also has several consumer-focused products.
Fulgent offers gene sequencing and panels as well as known mutations, genomic testing, and hereditary cancer screening.
The company also profiles tumors, provides carrier testing, and newborn genetics services. Fulgent has some condition-specific products as well. This includes testing for Alzheimer’s, dementia, Parkinson’s, and epilepsy.
Is Fulgent Genetics a Buy?
There are lots of companies that offer genetics testing and sequencing these days – and many more on the horizon. If you are looking at Fulgent, the real questions is why THAT genetics company?
Fulgent has some serious positives. The company currently offers 18,000 single-gene tests and they have 900 panels for which they can test.
With these capabilities, Fulgent has the ability to test for roughly 7,600 genetic conditions. The breadth of its offerings is a strong positive. Not only does Fulgent offer a wide variety of tests, the company can combine those tests into different configurations based on the specific needs of its customers. This flexibility is a strong positive.
Furthermore, Fulgent Genetics [NASDAQ: FLGT] developed its own technology platform. This technology compares data and applies algorithms to gain insight into test results.
With the addition of adaptive learning and analysis, Fulgent has the competitive advantage of “clinical accountability” – a term the company uses to express the value of its testing capabilities on treatment decisions and patient outcomes.
The Fulgent technology platform also provides internal benefits like operating efficiencies and the resulting cost savings.
The combination of choice, cost-effectiveness, and smarter test result interpretations has worked well for Fulgent so far. The company’s volume of billable tests has been growing.
In 2017, Fulgent billed for just under 16,600 tests. By 2018, the volume of Fulgent’s billable tests grew to roughly 22,300 or an aggregate figure of more than 59,200 since inception.
With numbers like this, it is clear that Fulgent is just getting started, but that does not mean that the company’s success is guaranteed.
What are the Risks of Buying Fulgent Genetics?
Genetics as an industry is growing by leaps and bounds. Its role in better medicine, customized solutions, and health improvements in general is practically assured, but there is no guarantee that Fulgent is going to lead the charge or that the company will even be a major player in genetics going forward.
Plus, neither the company nor its industry have bene around long enough to be predictable in any way.
In other words, Fulgent Genetics [NASDAQ: FLGT] is still getting started. The company doesn’t have enough operating history to anticipate seasonality or cyclicality in its revenue.
In order to keep growing, Fulgent will need to diversify its customer base as well as work to improve the demand for its products and services.
Right now, Fulgent hasn’t had time to build long-term relationships with its customers. Its customer mix still varies from period to period, sometimes drastically. Fulgent has had some quarters in which its revenue came from a relatively small number of clients. That is problematic because if they lose one of their biggest customers, it could be catastrophic.
Fulgent Genetics [NASDAQ: FLGT] also has a history of losses. The company was profitable in the first quarter of 2017, but it has posted numbers in the red every quarter before and since.
While that’s not unusual for companies in a growth industry, it is something to note. If organizations are used to losing money, it isn’t always clear to those firms when to stop spending and when to start leveling off their operations for more sustainable operations.
To complicate matters further, changes to the tax code could be a problem. The 2017 Tax Act limited net operating loss carryforwards and that is going to impact the company’s taxable income going forward.
Finally, would-be investors need to keep in mind that genetics is a technology-driven industry. Fulgent is one of the big players now, but a new entrant could upset that situation if it offered a cheaper, faster, or more comprehensive product. Investors in Fulgent need to be aware and cognizant of these facts.
Fulgent Genetics Stock Forecast Summary
Genetics is in its infancy or at least toddlerhood. If the industry follows the trajectory of other tech-forward developments, there will be a period of mergers and acquisitions.
The biggest companies will seek to buy the technology they need to compete rather than develop it themselves and shuffle the deck of the players involved. Time will tell where Fulgent falls.
There are many reasons to love Fulgent for your investment portfolio. The company’s focus on single-gene tests and combining them in new ways is revolutionary. Add to that its use of machine learning to gain deeper insights into patient results and there are big reasons to love this stock – just make sure to do your due diligence and stay on top of the industry news.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.