Genomic Health Inc. Stock Downgraded (GHDX)

NEW YORK ( TheStreet) -- Genomic Health (Nasdaq: GHDX) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and compelling growth in net income. However, as a counter to these strengths, we find that the growth in the company's earnings per share has not been good.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 2.8%. Since the same quarter one year prior, revenues rose by 13.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • GHDX has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. Along with this, the company maintains a quick ratio of 4.65, which clearly demonstrates the ability to cover short-term cash needs.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Biotechnology industry and the overall market, GENOMIC HEALTH INC's return on equity has significantly outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • GENOMIC HEALTH INC has improved earnings per share by 33.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern in the coming year. During the past fiscal year, GENOMIC HEALTH INC increased its bottom line by earning $0.25 versus $0.14 in the prior year. For the next year, the market is expecting a contraction of 112.0% in earnings (-$0.03 versus $0.25).
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Genomic Health, Inc., a molecular diagnostics company, engages in the development and commercialization of genomic-based clinical laboratory services that analyze the underlying biology of cancer allowing physicians and patients to make individualized treatment decisions. The company has a P/E ratio of 108.8, below the average health services industry P/E ratio of 112.7 and above the S&P 500 P/E ratio of 17.7. Genomic Health has a market cap of $878.9 million and is part of the health care sector and health services industry. Shares are up 11.5% year to date as of the close of trading on Thursday.

You can view the full Genomic Health Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet Ratings Staff
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