Assessing Guardant Health After Stock Surges 275% on New Cancer Screening Advances

• Wondering if Guardant Health stock is actually a bargain, or if the recent buzz is just hype? You are not alone. Plenty of investors are asking the same thing right now.
• The share price has soared, rising 31.5% in the past week and an incredible 275.8% over the last year. This signals surging optimism as well as possible shifts in the company’s risk and reward profile.
• Recent announcements, such as major advances in cancer screening technology and new regulatory approvals, are grabbing headlines and helping fuel the rally as the market reacts to higher expectations. These developments are creating a sense that Guardant Health is entering a new growth phase.
• But when we look at valuation, our score for Guardant Health is just 2 out of 6, meaning it is only undervalued on two of our six key measures. Let’s break down what these valuation approaches actually say about the stock, and why there may be a smarter way to judge its value by the end of this article.

Guardant Health scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Guardant Health Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow (DCF) model estimates what a company is worth today by projecting its future cash flows and discounting them back to their present value. In Guardant Health’s case, the 2 Stage Free Cash Flow to Equity approach considers analyst cash flow estimates for the next few years and then extrapolates further growth through 2035.

Guardant Health currently reports negative free cash flow, with the latest trailing twelve months (LTM) showing -$259.34 Million. Analyst projections suggest that free cash flow will remain negative in the immediate years, but is expected to turn positive and accelerate. The model estimates Guardant Health’s free cash flow could reach $315.55 Million by 2029, and by 2035, extrapolated estimates approach $1.87 Billion.

After discounting these future cash flows back to today’s value, the DCF model places Guardant Health’s intrinsic value at $249.38 per share. Compared to the company’s current share price, this suggests the stock is trading at a steep 61.9% discount. This implies significant undervaluation according to the model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Guardant Health is undervalued by 61.9%. Track this in your watchlist or portfolio, or discover 843 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Guardant Health.

Approach 2: Guardant Health Price vs Sales

For companies like Guardant Health that are not yet profitable but have strong revenue growth, the price-to-sales (P/S) ratio is often the best valuation metric. Unlike the price-to-earnings ratio, which requires positive earnings, the P/S ratio allows investors to compare how the market values each dollar of revenue, which is especially informative for high-growth healthcare firms.

Growth potential and business risks both play major roles in what is considered a “fair” P/S ratio. Fast-growing, innovative companies or those disrupting their industries typically command higher P/S multiples, reflecting optimism about future profits. Conversely, higher risk or slower revenue growth can justify a lower multiple.

Guardant Health currently trades at a P/S ratio of 13.27x, which is markedly above the healthcare industry average of 1.29x and the average of its direct peers at 2.20x. While this premium suggests investors expect substantial future growth, such a high multiple merits closer scrutiny.

This is where Simply Wall St's proprietary "Fair Ratio" comes in. Instead of relying solely on broad industry or peer comparisons, the Fair Ratio incorporates growth forecasts, profitability, company size and risk, tailoring its assessment to Guardant Health’s unique profile. Guardant Health’s Fair Ratio stands at 6.98x, just over half its actual P/S ratio, which implies the market price is running well ahead of what fundamentals justify, even after factoring in growth and risk.

Result: OVERVALUED

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1406 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Guardant Health Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a simple, powerful tool that lets you tell the story behind a company's numbers. In other words, your personal view of where the business is headed and why. With Narratives on Simply Wall St’s Community page, millions of investors connect a company’s story to a financial forecast and an estimate of fair value, making it much easier to decide whether the current price offers a good opportunity to buy or sell.

Narratives are easy to use and keep you in control, allowing you to adjust your assumptions for key factors like future revenue, margins, or risk. This way, you can see what the company should be worth if your view is correct. As new information becomes available, including major news, earnings, or industry trends, your Narrative is automatically updated to reflect the latest outlook. For Guardant Health, one user’s Narrative might forecast highly successful adoption of Shield diagnostics and a fair value of $93.82 per share, while a more cautious perspective, focusing on competition and operational risks, could yield a value of just $47.00. By comparing your Narrative’s fair value to the current price, you will have a more confident, well-informed way to make your investment decision.

Do you think there's more to the story for Guardant Health? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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