The phrase is out. All that it takes to grow to be an “immediate fairness analyst” on social media is the flexibility to assimilate oxygen and repeat bull thesis mantras. Incessantly. Hordes of weekend warriors with little or no real-world finance expertise discover a inventory to collectively cheerlead voraciously, and a self-fulfilling hype cycle will get created. These occasions are largely pushed by feelings slightly than fundamentals, creating over-exuberant inventory cults and skyrocketing valuations. “Muh rerate.”
Skilled buyers know higher. When a inventory is being hyped, considered one of two issues will occur as positive as loss of life and taxes. Both fundamentals will catch as much as the share value, or the valuation will revert to the imply. Whereas a perpetually inflated inventory might occur, it doesn’t as a result of the lemmings finally get bored and begin chasing one thing else.
That’s why when shares of most cancers testing agency Guardant Well being $GH tripled in a 12 months, we started to develop a bit apprehensive. Is that this simply hype on show? Is there a progress in fundamentals to match?
Hype or Substance?
As long-term buyers, we pay little consideration to short-term inventory efficiency. Nevertheless, we couldn’t assist however discover how over the previous 12 months, Guardant inventory spanked its benchmark like a red-headed stepchild.
Since Guardant is way from worthwhile, we are able to’t worth them utilizing the normal value to earnings ratio. As an alternative, we use our simple valuation ratio (SVR) which is market cap divided by annualized revenues. So for Guardant inventory to justify such robust value appreciation we completely must see robust income progress. Certainly Guardant’s income progress is about to speed up for the third 12 months in a row, a formidable feat.
Sometimes, as an organization matures, income progress begins to decelerate. That’s as a result of every year you’re beginning with a better base, making it troublesome to attain the identical progress fee as earlier years. Guardant is proving the other. Not solely can they proceed to develop, however they’re rising at a quicker fee off a bigger base. Preliminary 2025 outcomes level to 33% year-over-year progress pushed by “pioneering innovation” from their complete check choices. Formal 2025 outcomes shall be introduced subsequent month after which we are able to see what steerage they provide for 2026 income progress. If historical past repeats itself, they’ll undersell their potential.
In the beginning of final 12 months they guided to round 25% progress for 2025, then raised steerage to 31% progress, then beat it with 33% progress. The continued acceleration and “optimistic surprises” imply that progress buyers are ascribing extra worth to the enterprise as a result of issues are going higher than anticipated. The story of a single platform for most cancers screening and remedy is beginning to be realized. We all know that as a result of they’ve given the entire thing a very cool title. Meet Guardant’s “Infinity Good Platform.”
To Infinity and Past
Infinity is an analytical device that helps sufferers quantify and characterize what sort of most cancers they’ve. It profiles a affected person’s DNA, provides particular chemical substances to the DNA to see the way it reacts, seems to be for patterns in these reactions, then makes use of (look ahead to it) AI to determine the perfect remedy. It’s genomics meets AI meets customized drugs: three disruptive tech themes in a single funding.
This “Infinity Good Platform” is only a higher solution to bundle the three product strains we’ve at all times recognized about – Defend (screening), Reveal (recurrence), and 360 (customized drugs) – all of which we mentioned in final 12 months’s article about The Huge Most cancers Blood Take a look at Alternative.
Defend, Guardant’s screening product, was the primary FDA authorised blood check for detecting colorectal most cancers. The corporate set their sights on including lung most cancers detection into the identical check, then finally a number of forms of cancers. Positive sufficient, they succeeded the place Elizabeth Holmes failed, and Defend was granted Breakthrough Machine Designation from the FDA for multi-cancer detection in June 2025. The FDA gives this restricted approval standing to units which have the “potential to offer simpler remedy or analysis” for life-threatening ailments. One step nearer.
In final 12 months’s article, we pointed to Guardant having an answer for each step of the most cancers testing journey, not simply screening. This implies cross-selling turns into key. Get a buyer began on the Infinity platform by way of an annual blood check for all main forms of most cancers, then present a remedy plan for anybody unlucky sufficient to be recognized with most cancers. Even after a profitable remedy they will nonetheless obtain recurring revenues from recurrence testing. Administration validates this by saying that Reveal continues to be the corporate’s quickest rising product.
If there have been ever an excellent time to lift capital it will be when an organization is seeing their share value surge to lofty valuations. That method they obtain extra capital in trade for freely giving much less fairness, and it’s exactly what Guardant determined to do.
Topping Up On Money
In November 2025, Guardant’s administration determined to money in on all this success and refill their coffers by promoting $250 million in inventory and issuing $350 million in convertible notes.
The inventory sale is simple: administration is providing model new shares, diluting current shareholders, however elevating money. The convertible notes are a bit extra nuanced. Primarily the corporate is borrowing cash from massive funding banks to be paid again in seven years with no curiosity. The catch is these banks can select to transform the notes into GH shares at roughly $121.50 per share. That is above the present share value of $118, but when Guardant inventory continues to soar, present buyers may get diluted or face promoting stress as banks convert their notes to shares and offload them.
What does Guardant plan to do with an extra $600 million? In accordance with administration, they wished to “strengthen their steadiness sheet” to help including an extra 250 gross sales reps. We prefer to see a progress inventory investing in progress. In addition they could also be preemptively paying off earlier convertible notes that come due in 2027 – kicking the can down the highway.
Their present debt load sits at about $1.6 billion, the majority of which is these notes. With “simply” $800 million in present belongings (something that may be changed into money inside a 12 months) previous to the increase, it appears prudent for Guardant to be strengthening their steadiness sheet. Ideally, this increase will assist Guardant get to money move breakeven with out having to promote any extra fairness or tackle any extra debt.
They’re making progress. Money burn was down 16% in 2025, from $275 million to $230 million, and so they have visibility into optimistic free money flows by finish of 2028. Ramping up their Defend check appears to be dragging down profitability as administration claims their non-screening enterprise broke even in This autumn 2025. In gross margins as a key indicator of future profitability potential, we see consistency and energy.
Evaluating these gross margin numbers to mature testing corporations like Actual Sciences $EXAS (low 70s) or Natera $NTRA (low 60s) leads us to consider their potential for profitability is nice. In a couple of years we’ll anticipate to see working margins grow to be optimistic and begin trending upwards as they benefit from the “working leverage” which comes from correctly scaled companies. With sufficient money to get there, we’re left questioning if the income acceleration can proceed.
Issues Round Guardant Inventory
Issues appear to be coming collectively for Guardant which is exactly once we need to be much more vital. Whereas they’re executing, valuation has been growing. We use a easy valuation ratio which divides market cap by annualized revenues. Guardant’s present SVR of 13.9 is properly above their 6.4 common over the previous 4 quarters.
To place that quantity into context, our catalog common is about 7.5 whereas we discover something 3 times our catalog common – about 22.5 – to be too wealthy. The spectacular progress and basic optimism surrounding the corporate imply it must command a better-than-average premium, and it does.
Serious about issues and the place unhealthy information may come from, one massive purple flag from 2023 was Guardant’s heavy dependence on Medicare, 33% of complete revenues and 44% of precision oncology. Whereas these numbers aren’t supplied with any diploma of consistency as of late, the quantities to be reimbursed are sometimes lower than business payers and so they’re prone to quite a few issues that may befall a relationship with a authorities entity that’s presently a part of an objectively risky administration.
One other concern surrounds how Natera appears to be dominating with their recurrence check providing for a number of forms of most cancers together with CRC, breast, lung, bladder, and ovarian cancers. The check requires an preliminary tumor biopsy (tissue pattern), and ends in a blood check that detects most cancers recurrence. For Guardant’s Reveal which presently targets CRC, no tumor pattern is required which expands their complete addressable market on condition that one-third of colorectal most cancers incidents aren’t eligible for a biopsy.
We’re predominantly within the success of Guardant’s screening providing, Defend, as a result of that’s the place all of the leads will come from for his or her different product choices. Early detection is the closest we’ll get to a remedy for most cancers proper now. Survival charges skyrocket for a lot of most cancers varieties if caught early. That’s motive sufficient to advertise common screening which – particularly if lined by Medicare – looks as if a no brainer addition to your annual examine up.
That brings us to Grail $GRAL which is seeing very robust income progress from their multi-cancer detection check which isn’t truly FDA authorised. Nonetheless, they’re capable of promote it by way of a “laboratory-developed check” loophole. Detrimental gross margins make them seem deceptively unprofitable, however that’s due to some accounting stuff (amortization of intangible belongings in the event you’re ) ensuing from once they parted methods with Illumina $ILMN. With shares up +400% over the previous 12 months and an SVR of 31, Grail shares look considerably overvalued proper now. Nonetheless, it’s most likely price a better look in a future piece to see what all the joy it about and the way Grail’s progress threatens Guardant.
Conclusion
Going ahead, excellent news is the norm for Guardant as a result of they’re priced for it. Any deviation from the accelerating progress story will see shares fall simply as rapidly as they rose. Seeing the corporate increase capital underneath favorable circumstances, together with their estimates of reaching optimistic free money move by 2028, imply that debt could be sufficiently managed and dilution saved at bay whereas the corporate waits for working leverage to kick in as they proceed scaling. We’ll examine again in a 12 months to ensure all the pieces is on monitor.
