Wednesday, Craig-Hallum initiated coverage on Guardant Health (NASDAQ:) with a positive outlook, assigning a Buy rating to the company’s shares. The firm set a price target of $28.00, citing the potential undervaluation of the company’s core business.
The coverage, led by an analyst from Craig-Hallum, suggests that Guardant Health’s current market value does not fully reflect its business prospects, particularly in therapy selection and minimal residual disease (MRD) testing. The analyst projects that these segments could sustain a compound annual growth rate (CAGR) of over 20% for the next five years.
According to the analyst’s evaluation, even without factoring in the success of Guardant Health’s cancer screening efforts, the intrinsic value of the company’s therapy selection and MRD businesses could be around $28 per share. This valuation would be nearly double the present stock price and align with the valuation multiples of leading companies in the oncology testing market.
The analyst further noted that Guardant Health’s stock appears to be undervalued by approximately 50%, based on current figures. This assessment holds even if the company’s cancer screening initiative does not yield economic value and incurs costs up to $500 million.
Finally, the analyst pointed out that the $28.00 price target might be conservative. If Guardant Health demonstrates positive developments in its cancer screening program, the actual value could surpass the current target, suggesting a potential upside for investors.
InvestingPro Insights
Guardant Health’s (NASDAQ:GH) financial health and market performance provide additional context to Craig-Hallum’s positive outlook. The company’s market capitalization stands at $2.11 billion, reflecting investor sentiments about its growth potential and current valuation. Despite a challenging P/E ratio of -4.09, indicating that the company is not currently profitable, Guardant Health’s revenue has grown by 25.45% over the last twelve months as of Q1 2023. This growth rate underscores the firm’s potential in therapy selection and MRD testing markets, aligning with the analyst’s projection of a sustained CAGR of over 20%.
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InvestingPro Tips reveal that Guardant Health is trading at a high Price/Book multiple of 13.31, which may support the analyst’s view of potential undervaluation when considering the company’s growth prospects. Moreover, the company’s liquid assets exceed its short-term obligations, indicating a stable financial position to support ongoing operations and investments in its cancer testing technologies. For investors looking to delve deeper into the financial nuances of Guardant Health, there are additional InvestingPro Tips available that provide a comprehensive analysis of the company’s financial health and market performance. Utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access these valuable insights.
As Guardant Health is poised for potential growth, particularly in its core business areas, the company’s stock may present an opportunity for investors who are aligned with Craig-Hallum’s optimistic assessment. With the next earnings date set for May 9, 2024, the market will be watching closely for signs of continued progress and validation of the company’s strategic initiatives.
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