Here's Why You Should Retain Myriad Genetics (MYGN) for Now
Investors are optimistic about Myriad Genetics (MYGN) owing to strong testing volume growth and notable product launches.
Myriad Genetics, Inc. MYGN is well poised for growth in the coming quarters on the ongoing strong recovery in testing volumes. The company’s recent launches of myRisk and RiskScore raise optimism. A strong solvency position is an added advantage. However, escalating expenses and foreign exchange fluctuations do not bode well for the stock.
Over the past year, the Zacks Rank #3 (Hold) stock has gained 139.4% against the 6.8% decline of the industry and the 29.7% rise of the S&P 500.
The renowned molecular diagnostic company has a market capitalization of $2.49 billion.
Over the past five years, the company’s earnings have seen a 171.7% decline, compared to the industry’s 14.4% rise and the S&P 500’s 2.8% increase. The expected growth rate for the next year is 153.9%, compared with the industry’s growth expectation of 1.4% and the S&P 500’s estimated 15.5% growth for the next year.
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Let’s delve deeper.
Factors in Play
Product Volume Rebound: We are upbeat about Myriad Genetics’ strong testing volumes in second-quarter 2021. Total testing volumes reflected a 70% improvement year over year and 8% growth on a sequential basis in this quarter. The sequential growth was largely led by strength in hereditary cancer, prenatal products, and GeneSight test in Mental Health.
Myriad Genetics reported 7% volume growth in hereditary cancer sequentially despite considerable alignment changes to most territories and a significant reduction in field sales force during April. Notably, the company’s tumor profiling volume grew 13% sequentially, driven by myChoice CDx and Prolaris.
Product Launches: Myriad Genetics’ slew of products launches raise optimism. During its earnings call for the second quarter of 2021, the company noted the launch of myRisk and RiskScore, which marked a significant step toward improving access to genetic testing.
The myRisk with RiskScore offers breast cancer risk assessment for all women not previously diagnosed with breast cancer. In February 2021, the company launched the new Vectra Cardiovascular Risk assessment that can predict the risk for cardiovascular events in patients with rheumatoid arthritis. The new test report provides a customized estimate of a patient’s one-year risk of rapid radiographic progression.
Strong Solvency: Myriad Genetics exited the second quarter of 2021 with cash and cash equivalents of $184.3 million. Short-term debt at the end of the second quarter of 2021 was $104 million. The figure is much lower than the quarter-end cash and cash equivalent and marketable investment securities. Moreover, the company had no long-term debt on its balance sheet at the end of the second quarter of 2021.
Escalating Expenses: Myriad Genetics registered a significant rise in operating costs in second-quarter 2021. Research and development (R&D) expenses rose 12.1% year over year in the reported quarter. Meanwhile, selling, general and administrative (SG&A) expenses climbed 25.5%.
Foreign Exchange Headwinds: Myriad Genetics is susceptible to the risk of exchange rate fluctuations between foreign currencies and the U.S. dollar since the company receives a considerable portion of its revenues and pays a portion of its expenses in foreign currencies. The translation of these foreign currency-denominated transactions will result in decreased revenues and net income, and increased operating expenses, if dollar strengthens against foreign currencies.
Increasing Competition: Myriad Genetics is currently facing competition in its key BRACAnalysis market, according to management. The company expects competition to intensify in its current fields with recently observed advancements in technology. Further, Myriad Genetics anticipates that other companies may also launch molecular diagnostic tests, posing competition to its testing products and services.
Myriad Genetics has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved north to 13 cents.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $165.03 million, suggesting a 13.7% rise from the year-ago reported number.
Horizon Therapeutics, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.3%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Vertex Pharmaceuticals, sporting a Zacks Rank #2 (Buy), has a long-term earnings growth rate of 9.8%.
Moderna, carrying a Zacks Rank #2, has a long-term earnings growth rate of 29.1%.
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