What a brutal six months it’s been for Myriad Genetics. The stock has dropped 67.5% and now trades at $4.91, rattling many shareholders. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Myriad Genetics, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Do We Think Myriad Genetics Will Underperform?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why you should be careful with MYGN and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Regrettably, Myriad Genetics’s sales grew at a tepid 1.8% compounded annual growth rate over the last five years. This was below our standards. 
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Myriad Genetics, its EPS declined by 28.9% annually over the last five years while its revenue grew by 1.8%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Myriad Genetics’s five-year average ROIC was negative 23.3%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.
Final Judgment
Myriad Genetics falls short of our quality standards. After the recent drawdown, the stock trades at 38.6× forward P/E (or $4.91 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.
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