Genetic testing services specialist Fulgent Genetics (NASDAQ:FLGT) is known for providing molecular and antibody testing for Covid-19. Folks who wish to get into the “testing trade” can therefore choose Fulgent Genetics stock. However, there might be concerns about the stock’s valuation.
It should also be noted that there are other strong players in this niche market. For example, Abbott Laboratories (NYSE:ABT) is well known among the medical and investing communities for providing testing instruments for Covid-19.
On the other hand, Fulgent is making significant progress in bringing its testing kits to the public. So, where does this leave informed investors? As often happens nowadays, they must decide if they’re willing to ignore a stocks’s high valuation in order to take a position in a profitable company.
A Closer Look at Fulgent Genetics Stock
Starting in the middle of April, the price action Fulgent Genetics stock resembled an airplane taxiing down a runway. In other words, it went sideways for a little while, and then it went up towards the clouds.
Thus, from mid-April through the end of June, Fulgent Genetics stock kept returning to the $16 area. But there’s an old saying in the markets: the longer the base, the higher in space. Perhaps, then, the stock was only basing for a big move upwards.
And indeed, that’s exactly what happened. From early July to the middle of August, Fulgent Genetics stock rocketed from $16 to the $40 area. That might sound like a purely bullish development, and momentum-focused traders certainly might see it that way.
Value-oriented investors, however, might see things differently. As a result of the swift price move, the trailing 12-month price-to-earnings ratio of Fulgent Genetics stock was a whopping 338.87 as of Aug. 17.
If you decide that you like the company but don’t want to overpay for the stock, that’s perfectly understandable. It’s okay to wait until Fulgent Genetics stock takes a breather from its moon shot.
May 18 was a big day for Fulgent Genetics. That’s when the company announced that its subsidiary, Fulgent Therapeutics, had received Emergency Use Authorization from the U.S. Food and Drug Administration for its flagship RT-PCR Covid-19 test.
In this type of Covid-19 test, RT-PCR stands for reverse transcription polymerase chain reaction. Through this testing method, “two known distinct regions within the SARS-CoV-2 genome” are identified and the results “are typically available within 1-2 days of your sample being received by the lab.”
That last part is of crucial importance as no one wants to wait a week or longer to get their Covid-19 test results. Thus, the FDA recognized Fulgent’s ability to provide a genetics-based testing methodology that’s not only reliable, but also relatively quick.
Fulgent Brings Testing Home
Yet, bigger and better things were to come for Fulgent Genetics. On June 16, the company revealed that the FDA had granted Emergency Use Authorization for Fulgent’s at-home Covid-19 testing solution.
Fulgent Genetics Chief Commercial Officer Brandon Perthuis explained how the company’s at-home test was an ideal complement to Fulgent’s highly successful RT-PCR Covid-19 test:
“Since launching our RT-PCR Test (non at-home test) several months ago, we have won several strategic accounts and are processing thousands of tests daily with an average turnaround time of 24 hours from receipt of sample. This at-home COVID-19 test will diversify our go-to-market approach for tests by utilizing our existing consumer-initiated genetic testing platform.”
On top of that, Fulgent Genetics just announced the opening of a massive laboratory in Texas, known as Fulgent Houston. This lab will, according to the company, have the capacity for 20,000 tests per day. Plus, Fulgent reports that it will be able to expand the lab if and when the demand for testing increases.
The Bottom Line
All in all, there’s no doubt that Fulgent Genetics is in expansion mode. The company seems to be making all the right moves, but the valuation of Fulgent Genetics stock might raise eyebrows.
Hence, value-focused investors might be bullish long-term but can still choose to wait for lower prices before taking a position in Fulgent Genetics stock.
As of this writing, David Moadel did not hold a position in any of the aforementioned securities.