Veracyte Inc (NASDAQ:VCYT): A GARP Stock With Strong Growth and a Reasonable Price

For investors looking to balance the search for high-growth companies with some caution, the "Growth at a Reasonable Price" (GARP) method presents a practical middle path. This process tries to find companies with good and lasting expansion paths, but whose shares are not valued at extreme levels that allow for no mistake. It is a way that sidesteps the speculative excess of pure momentum investing while also avoiding possibly slow-moving value investments. By filtering for stocks with good growth marks, sound financial condition, acceptable earnings, and a fair price, investors can create a portfolio of companies ready for increase without paying too much for the chance.

One stock that recently appeared from this type of "Affordable Growth" filter is Veracyte Inc (NASDAQ:VCYT). The South San Francisco company is a diagnostics business concentrated on creating and selling tests for different cancers, such as prostate, thyroid, breast, and bladder. Its system uses genomic data, bioinformatics, and artificial intelligence to give doctors information for diagnosis and treatment plans.

Examining the Fundamental Details

A close fundamental analysis report for Veracyte shows a varied but finally positive picture that fits the GARP idea. The company gets an overall fundamental score of 6 out of 10, but its individual scores give a more detailed story connected to the affordable growth argument.

Good Growth Path The center of the GARP case for Veracyte is in its growth measures, which get a score of 7. The company is showing notable increase, especially in its profits.

• High EPS Increase: Over the previous year, earnings per share (EPS) rose by a remarkable 353.33%, a clear sign of better earnings on a per-share basis.
• Good Revenue Growth: Revenue increase is also solid, growing 16.41% in the last year. More significantly, the average revenue increase over recent years is at a very good 29.93%.
• Positive Future Expectation: Experts believe this progress will persist, with estimated yearly EPS increase of more than 52% and revenue increase of 11.54% in the next years.

This steady and high growth is exactly what growth-focused investors want. For a GARP method, it supplies the necessary "G" – a base of increase that can support a higher price than a slow-growing company.

A Price Relative to the Field With a growth score of 7, the important question is if the stock is priced fairly. Veracyte’s valuation score of 5 indicates a middle position, which given its field and growth picture, can be viewed as acceptable.

• Field Comparison: While Veracyte’s Price-to-Earnings (P/E) ratio of 122.08 seems high alone, it is actually priced lower than about 89% of similar companies in the biotechnology field. The same applies for its Price-to-Forward Earnings and Enterprise Value-to-EBITDA ratios.
• Growth Consideration: The report states that the high-looking P/E ratio could be partly explained by the company’s high anticipated earnings growth and its acceptable earnings. This is the core of the "reasonable price" assessment, balancing the extra cost against the growth speed and basic business strength.

This price comparison is key for the affordable growth filter. It removes companies whose growth is already completely and overly reflected in the market price, looking for those where the market may not yet fully recognize the future path.

Supporting Basics: Condition and Earnings A lasting growth story needs a stable base. Veracyte’s financial condition is a clear positive, with a score of 8.

• The company carries no debt, setting its Debt/Equity ratio at zero, a situation that is better than most of its field and offers major financial room and stability.
• Cash availability is very good, with a Current Ratio of 6.23, showing more than sufficient means to meet near-term needs.

Earnings, with a score of 6, shows a company moving toward regular profits.

• While it has recorded negative profits in some of the past five years, it reached positive profits and operating cash in the last year.
• Its earnings levels are good compared to the field, with Profit, Operating, and Gross Margins all better than over 90% of biotechnology peers.

These parts of condition and earnings are what make the growth "affordable" and less risky. Sound condition lowers failure risk and pays for future growth from within, while better earnings suggests the growth is becoming more worthwhile to shareholders with time.

Summary

Veracyte Inc offers an example of the affordable growth filtering process. It has the necessary element of good, clear growth in both revenue and profits, supported by positive expert forecasts. This growth is not valued at an extreme field premium, but instead sits at a middle price compared to its high-growth biotech peers. Also, the growth story is supported by a very strong, debt-free financial position and developing earnings with field-leading margins. This mix, strong growth, a fair field-relative price, and a sound financial foundation, makes VCYT a stock that deserves more study for investors using a GARP method.

For investors wanting to find other companies that match this picture of good growth at a fair price, you can review the full standards and findings using the Affordable Growth stock screener.

Disclaimer: This article is for information only and is not financial advice, a suggestion to buy or sell any security, or a support of any investment plan. Investors should do their own study and think about their personal money situation and risk comfort before making any investment choices.