Even during a down period for the markets, Natera has gone against the grain, climbing to $211.23. Its shares have yielded a 22.1% return over the last six months, beating the S&P 500 by 23.8%. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.

Is now still a good time to buy NTRA? Or are investors being too optimistic? Find out in our full research report, it’s free.

Why Are We Positive On Natera?

Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ: NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.

1. Elevated Demand Drives Higher Sales Volumes

Revenue growth can be broken down into changes in price and volume (the number of units sold). While both are important, volume is the lifeblood of a successful Immuno-Oncology company because there’s a ceiling to what customers will pay.

Natera’s tests processed punched in at 893,600 in the latest quarter, and over the last two years, averaged 19.5% year-on-year growth. This performance was fantastic and shows its offerings have a unique value proposition (and perhaps some degree of customer loyalty).

2. Adjusted Operating Margin Rising, Profits Up

Adjusted operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies because it excludes non-recurring expenses, interest on debt, and taxes.

Natera’s adjusted operating margin rose by 32 percentage points over the last two years, as its sales growth gave it operating leverage. Its adjusted operating margin for the trailing 12 months was breakeven.

3. Increasing Free Cash Flow Margin Juices Financials

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

As you can see below, Natera’s margin expanded by 66.9 percentage points over the last five years. Natera’s free cash flow margin for the trailing 12 months was 5%.

Final Judgment

These are just a few reasons why we think Natera is a great business, and with its shares outperforming the market lately, the stock trades at $211.23 per share (or a forward price-to-sales ratio of 11.3×). Is now a good time to initiate a position? See for yourself in our comprehensive research report, it’s free.

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