I face a conundrum trying to understand the respective merits of 2 very similar investment and the choices folks have made here and wanted to seek some input from those closer to the action on this before I take a position.
Guardant Health and Invitae do very similar next generation gene sequencing using a common platform provider (so the underlying base tech is not necessarily a differentiator).
Overall Business Comparison
Guardant Health: A precision oncology company, provides non-invasive cancer diagnostics. It offers liquid biopsy tests for advanced stage cancer, such as Guardant360, a molecular diagnostic test that measures various cancer-related genes from circulating tumor DNA (ctDNA); and GuardantOMNI, a broader panel measuring various genes from ctDNA. The company also provides LUNAR-1 for recurrence detection in cancer survivors; and LUNAR-2 for early detection of cancer in higher risk individuals. Guardant Health, Inc. was incorporated in 2011 and is headquartered in Redwood City, California.
Invitae: The company’s tests include multiple genes associated with hereditary cancer, neurological disorders, cardiovascular disorders, pediatric disorders, metabolic disorders, and other hereditary conditions; proactive health and wellness screening; and preimplantation embryo testing and carrier screening for inherited disorders, prenatal diagnosis, miscarriage analysis, and pediatric developmental disorders.
So Guardant is more focused in its domain areas and targeting mainly Onco and focused on liquid biopsy that drives targeted treatment.
Invitae is blood (and saliva) with a broader focus including non invasive prenatal testing which is a large and fast growing opportunity and more 23andMe like and more mass market and predictive.
Sales & Growth Rates
GH’s Revenues for the last few Quarters: Q4 25.88m Q3 17.44m (Beat and Miss)
GH’s Revenue Growth rate for last few Quarters: Q4 64.3% Q3 94.9% (Decelerating)
GH’s expected 2019 revenues = $135m and 2020 = $187.5m
NVTA’s Revenues for the last few Quarters: Q4 42.65m Q3 34.8m Q2 31.45m Q1 26.86m (Beat, Beat, Beat, Mix)
NVTA’s Revenue Growth rate for last few Quarters: Q4 78.57% Q3 105.9% Q2 160.2% Q1 167.6% (Decelerating)
NVTA’s expected 2019 revenues = $223m and 2020 = $326m
So NVTA is nearly double the revenues and whilst both are decelerating, NVTA is holding upabout 1/2 or 1 quarter higher in growth rates.
GH has a market cap of $7.57B and a P/S of 29.54 (which makes no sense - I think it is more like 60+)
GH has an enterprise value of $7.19B and a P/EV of 79.34
NVTA has a market cap of $2.18B and a P/S of 11.32
NVTA has an enterprise value of $2.13B and a 14.45
NVTA has a much lower market cap and at least 1/3 the valuation if not 1/6th.
NVTA has a much lower market cap and at least 1/3 the valuation if not 1/6th is growing 14% percentage points faster and is forecasted to end up a much larger revenue company. Companies have similar balance sheets.
So my question:
Besides the business model focus (clinical diagnosis and precision treatments vs predictive health testing), the base tech is very similar so they could crossover and play each other’s respective roles, on a pure investment basis - why wouldn’t you prefer to be in NVTA rather than GH?
As a follow up - given both companies’ respective glide paths in decelerating revenues - at what point are holders going to bail?