Invite (NYSE: NVTA) is a US diagnostic medical company headquartered in San Francisco. The organization provides services for a wide range of genetic tests and provides results for individual clients., healthcare institutions and biotechnology companies. The business was founded in 2010 and until the renaming in 2012 was known as Locus Development.
What he earns
The company offers individuals and legal entities high-tech genetic testing services for forecasting the state of health and applying the results in oncology, cardiology, neurology, pediatrics, as well as improving therapy in the treatment of rare diseases. Invitae collects and processes the received data, which helps to conduct scientific research on their basis and improve the accuracy of their own products in the field of genetic engineering.
The company plans to absorb other businesses to expand testing statistics and enter new markets., share genetic data worldwide for earlier and more accurate diagnosis of patients. We also plan to provide information services, that track patients' genetic health throughout their lives.
What's wrong
During the year the shares fell 6 once. To date, stocks have lost a lot in price and have fallen from their all-time highs. 61,5 $ in December 2020 to current values in the region of 10-11 $. This is a typical story for many growth stocks., the attractiveness of which decreases as the bullish sentiment in the market increases: instead of promising "missiles", anxious investors are increasingly paying attention to stocks of value and, for example, buy "money cows".
Revenue is growing, cash flow is falling. The company is scaling, makes more and more tests and increases revenue, but at the same time, it is constantly plagued by high spending on R&D and the closing of acquisitions of other businesses to ensure its own growth.. As a result, In the third quarter of 2021, Invitae's operating expenses were 176% from proceeds, which is worse 149% for the same period a year earlier.
Additional issue. The company is steadily diluting the stake of current shareholders with additional issues of its securities. In general, this is a normal practice for growing companies., but over the past five years, the number of Invitae shares in free float has almost quadrupled, which systematically reduces earnings per share and does not bring joy to investors, who own the issuer's securities for a long time.
What good
Governmental support. In February, the US Presidential Commission on the Implementation of the National Cancer Control Program released a report, on the 15th page of which officials give a direct recommendation to expand the availability of genetic testing for citizens and the wider application of the method in the prognosis and therapy of cancer. Invitae will be a direct beneficiary of such initiatives and will receive additional opportunities for earnings from the administration of Joe Biden.
All ages are submissive. The company's product finds application among a wide audience. Tests solve problems and help people from four main groups, where the age of potential patients varies from newborns and children to pensioners and older people 65 years. In total, the market is estimated at $ 154 million in the US alone.
Appraisal has become attractive. Multiplier P / BV, which reflects the ratio of a company's market capitalization to its book value, decreased at the issuer for three years in a row, but for 2021, the figure made a rapid breakthrough and decreased fivefold.. Current value 0,79 makes Invitae underrated: for every dollar of its book value, investors pay only when buying shares 79 Cents, which looks attractive even to value investors.
What's the bottom line?
Invitae builds a socially useful and promising business, which gains an additional advantage through government initiatives and analysis of genetic test data.
With the current assessment, the company really looks attractive not only for risky players like Katie Wood., but also for private investors, who prefer shares of value.
The issuer still has the usual risks for fast-growing medical companies, when costs also increase significantly with the growth of the business, – in such a situation, success depends on the ability of management to competently maintain a balance and avoid mistakes in management..
