Here's Why Natera Inc. Stock Is Surging Today

By Cory Renauer Markets Fool.com

What happened

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Shares of Natera Inc. (NASDAQ: NTRA), a leader in non-invasive DNA analysis, finished Wednesday's session 17.6% higher following Tuesday afternoon's earnings call. Strong uptake across the board gave investors a reason to cheer.

So what

Natera has been battered since its IPO in 2015 as a transition to in-network contracts for its non-invasive genetic tests continues to pressure total revenue.Natera might be booking less revenue per test, but it also processed more than 121,000 tests in the first quarter, about 12% more than the same period last year.

Image source: Getty Images.

Investors weren't too pleased with a 24% contraction of first-quarter revenue compared to the previous-year period, but management dropped hints that the company might reach profitability before it needs to raise more capital.

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Now what

Natera left guidance for full-year revenue at between $210 million and $230 million, but it lowered its net cash burn estimate by $10 million. Now the company expects to burn through between $65 million and $75 million this year.

With$116.6 million in cash, cash equivalents, short-term investments, and restricted cash on the balance sheet at the end of March, there's a slight chance the company might reach positive cash flows before it needs to dilute shareholder value with a secondary offering.

Even after today's run-up, Natera's enterprise value is a sprightly $387 million. With leading tests in a women's health market the company estimates at more than $15 billion annually, this diagnostic stock might be in deep value territory.

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Cory Renauer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.