FLGT - Fulgent Genetics: Buy Growth Ahead Below Liquidation Value

2024-02-21 07:20:23 ET

Summary

• Fulgent Genetics spent the past 2 years digesting the Covid cliff, which wiped out 80% of its market capitalization since the 2021 peak.
• The company is about to hit an inflection point, as 2024 will be the year revenues return to growth while margins expand.
• The Fulgent Pharma business acquired at the end of 2022 will remain a drag near term but offers significant mid- to long-term upside potential.
• With a liquidation value of $27.50 and a fair value of $40 per share, FLGT provides a rare low-risk, high-reward opportunity to investors with a 3-5 years investment horizon.

Fulgent Genetics, Inc., (FLGT) is a leading provider of comprehensive genetic testing solutions, offering an extensive suite of testing services to healthcare providers, researchers, and individuals, mainly in the United States. The company specializes in next-generation sequencing [NGS] technology, enabling the analysis of various genetic conditions and diseases with high accuracy and efficiency. With a focus on innovation and technology-driven solutions, Fulgent Genetics aims to empower healthcare professionals and patients with actionable genetic insights to inform medical decisions, improve patient outcomes, and advance precision medicine. Additionally, the company offers customizable testing panels, genetic counseling services, and robust data analysis capabilities, positioning itself as a trusted partner in the rapidly evolving field of genetic testing and personalized healthcare.

Thesis

During the pandemic, Fulgent Genetics demonstrated its ability to leverage its proprietary NGS technology platform to quickly develop and scale production and delivery of a Covid-19 test, providing reliable test results within 24 hours. This sent the former micro-cap company on an incredible growth journey, from $30 million revenue in 2019 to almost $1 billion in 2021, with a valuation exceeding $3.4 billion in February 2021.

The subsequent fall was equally epic, as the Covid pandemic and related revenues literally vanished over the course of the past two years. But behind the "crash" headlines, Fulgent Genetics has grown its core (non-Covid) business to almost 10x what it was in 2019, both organically and through a series of small acquisitions....

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