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Is Invitae Stock a Buy Under $5?

Invitae's (NVTA) significant revenue growth in its most recently reported quarter and its success in bringing customized health monitoring into the mainstream have heightened investor optimism around the stock. However, given the company's widening losses and poor profitability, the question is, is it worth betting on the stock at the current price level? Read on, let’s find out.

Genetic testing company Invitae Corporation (NVTA) in San Francisco offers genetic tests in various therapeutic fields, including cardiology, neurology, hereditary cancer, pediatrics, and uncommon disorders.

The stock has slumped 83.1% in price over the past year and 34.2% over the past month to close yesterday's trading session at $5.57. In addition, it is currently trading 84.3% below its 52-week high of $35.51.

NVTA's remarkable tailored medicines and enhanced trials enabled it to generate significant revenue growth in its last reported quarter, but the firm has yet to deliver a profit. Indeed, the company’s negative profit margins and rising expenditures and losses are concerning.

Here is what could shape NVTA's performance in the near term:

Inadequate Financials

NVTA's total revenue increased 19.4% year-over-year to $123.69 million for the three months ended March 31, 2022. However, its operating expenses increased 55.9% from their year-ago value to $336.92 million. Its operating loss grew 89.8% from the prior-year quarter to $213.24 million. And the company's net loss increased 66.1% year-over-year to $181.86 million in the prior-year period. Its loss per share came in at $0.80 over this period.

Poor Profitability

NVTA's trailing-12-months gross profit margin of 24.3% is 56% lower than the 55.2% industry average. Its 0.11% trailing-12-months asset turnover ratio is 68.5% lower than the 0.35% industry average. Also, its trailing-12-months ROA, net income margin, and ROC are negative 7.7%, 82.3%, and 13.6%, respectively.

POWR Ratings Reflect Bleak Outlook

NVTA has an overall F rating, which equates to a Strong Sell in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. NVTA has a D grade for Stability and Quality. The stock’s 1.75  beta is consistent with its Stability grade. In addition, NVTA's poor profitability is in sync with the Quality grade.

Among the 50 stocks in the D-rated Medical – Diagnostics/Research industry, NVTA is ranked #48.

Beyond what I have stated above, one  can view NVTA ratings for Growth, Momentum, Value, and Sentiment here.

Click here to checkout our Healthcare Sector Report for 2022

Bottom Line

Although NVTA's advances in customized health monitoring and treatment development have increased investors' optimism about the stock's prospects, we believe investors should avoid NVTA since the company's weak fundamentals and negative profit margins could impact its stock’s price performance in the near term.

How Does Invitae Corporation (NVTA) Stack Up Against its Peers?

While NVTA has an overall F rating, one might want to consider its industry peers, Global Cord Blood Corporation (CO) and Qiagen N.V. (QGEN), which have an overall A (Strong Buy) rating.

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NVTA shares fell $0.39 (-7.00%) in premarket trading Wednesday. Year-to-date, NVTA has declined -63.52%, versus a -12.06% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.


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