What EXACTLY do you mean?

Fight cancer and make money Wall Street Connected Profit Like The Pros Brought to you by: Dear subscriber, Detecting cancer early increases your odds of survival. How much? Quite a bit. Exact Sciences (EXAS) aims to improve this often overlooked area. The problem is they have yet to turn a profit despite outstanding revenue growth. So, what’s the problem? We flagged this stock in our TrackstarIQ search data not because interest was increasing but was in fact decreasing. Given the hype around the company last year, that seemed a bit odd. We decided to take a deep dive into the company and see what investors might be missing. Exact Sciences business plan Exact Sciences sits in that precarious no-mans-land for biotech. They generate growing revenues on a limited product base but aren’t yet profitable. Introduced in 2014, their flagship product Cologaurd uses DNA testing on stool for colorectal cancer. Since then, the company has aggressively expanded into three main areas: In total, their achievable market size is $58 billion in the U.S. To enhance its growth, the company has been a serial acquirer, picking up no less than 9 companies in the last 3 years. That helped to accelerate revenue growth during that same period. Not all is as it seems One of the most difficult problems biotechs face is cash flow. Exact Sciences isn’t immune to this problem. Operational cash flow has yet to turn positive on an annual basis. However, Q3 and Q4 of 2021 were both positive. In fact, if you back out the $412.6 million charge to research and development from Q4, net income would have landed at -$24.2 and -$31.2 million. That’s pretty darn good. However…. Exact Sciences also got a massive income tax benefit of $242 million in the last quarter, which would take net income back down to -$273.2 million. And they made $32 million from Covid-19 testing which may decline in the future. Competitor valuation When we stack up EXAS against the competition, its value looks fairly promising. First, let’s state the obvious. None of these companies have positive earnings, cash flow, or pay dividends. So, we need to look at things on a relative basis. To do that, we can judge them based on price to sales and price to book alongside revenue growth. In nearly every case, EXAS trounces the competition. It’s the cheapest price to book except for Invitae (NVTA) and the cheapest price to sales ratio. They also boast one of the highest gross profit margins. But there’s one other piece that’s worth considering - R&D. As a percentage of revenue, Exact Science’s R&D comes in at 40.51% over the trailing 12 months. However, it was around 16% before the last major acquisition. With the exception of Natera (NTRA) who’s R&D accounts for around 25% of revenues and Invitae at +80% of revenues, all the other companies are around 40%. Our hot take On a price-to-book basis, EXAS could be worth double its current value. Using price to sales ratio, you land anywhere between 50%-100% upside. None of this accounts for a potential repricing of this sector which could go in either direction. Overall, Exact Sciences provides tremendous growth at a reasonable price within its industry. Sponsored [Get In On This Green Energy Company Before The Herd]( Clean Energy Company Partners with High Profile Auto Racing Group to Fill Major Emerging Hydrogen Fueling Station Gap [Find Out More Here!]( What we’re watching [Wall Street Connected: FedEx]( A look today at why the world's largest express delivery company, FedEx, is receiving support and reaching a near all time share price high. [Watch Now]( OUR RECENT POSTS [IBM reports after the bell]( Here’s what to expect [Read more]( [What’s with Sohu?]( China’s online giant breaks out [Read more]( - The Editorial Staff # [submit to reddit]( [submit to reddit]( [submit to reddit]( To ensure delivery of all emails, [whitelist us](. Update your email preferences or unsubscribe [here](#). View our privacy policy [here](#). Copyright ©2021 InvestingChannel. All rights reserved. 1325 Avenue of the Americas, Floor 27 & 28 New York, New York 10019 Disclaimer: This is not investment advice. This InvestingChannel, Inc. newsletter is for information purposes only and opinion-based. Futures, forex, stock, and options trading are not appropriate for all investors. There is a substantial risk of loss associated with trading these markets. Losses can and will occur. No system or methodology has ever been developed that can ensure returns or against losses. No representation or implication is being made that using any of these methodologies or systems will generate returns or ensure against losses. Investors should be cautious about any and all investments and are advised to conduct their own due diligence prior to making any investment decisions. [Link](