Why Genomic Health Shares Dove
Nov 8th 2012 12:55PM
Updated Nov 8th 2012 1:00PM
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 molecular diagnostics company Genomic Health (NAS: GHDX) dropped as much as 21% today after the company reported disappointing third-quarter earnings results.
So what: For the quarter, Genomic reported a 12.5% increase in revenue to $58.6 million and an adjusted profit of $0.11. Revenue figures came in shy of Wall Street's consensus estimate of $59.9 million, while EPS was a saving grace, beating forecasts by $0.06. During the quarter, Genomic delivered 7% more Oncotype DX test results compared to the year-ago period, and it announced positive prostate cancer validation study results that should allow its Oncotype DX to be marketed as a prostate cancer diagnostic test by the first half of 2013.
Now what: What this really comes down to is investors expecting much more in terms of Oncotype DX growth from a company trading at a frothy 83 times forward earnings even after today's large drop. This is a case where the technology makes sense on paper and should eventually become a success, but weak global growth and a relatively young product are creating a melting pot of concerns that will take some time to congeal. I'm perfectly happy watching Genomic Health from the sidelines in the meantime.
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The article Why Genomic Health Shares Dove originally appeared on Fool.com.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. Motley Fool newsletter services have recommended buying shares of Genomic Health. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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