Mr Market Round 7, still undervalued but getting harder to explain why
Its been a while since I’ve checked in on our friend Mr. Market and his ongoing relationship with Fulgent Genetics. So let me ask again, Mr. Market, where are you on FLGT?
Because from where I’m sitting, you still don’t get it.
The Setup
FLGT is currently trading around $23. The market cap sits at roughly $710 million. And right now, the company is sitting on approximately $800 million in cash and investments. Let me say that again for the people in the back, the company has roughly $800 million in cash on approximately a $710 million market cap. You are paying negative dollars for the entire operating business. The enterprise value is below zero.
After last earnings the stock ran up toward the high $20s, which seemed appropriate. The business delivered. Revenue beat. Earnings beat by a mile. Guidance raised. The price finally started reflecting some of the value Ive been writing about since Round 1. Then the broader market got shaky, and FLGT pulled right back down. Which I guess is what happens to overlooked small caps in a risk off environment. They get sold indiscriminantly with everything else? and nobody steps in to buy because almost nobody is watching?
So here we are. The stock gave back its post earnings move, but the fundamentals didnt give back anything. The business is in a better position today than it was six months ago, and the stock is cheaper. Thats the setup.
The Cash Situation, Again
If you’ve been following this series you know the drill. Screeners still dont surface the full picture. The real number lives in the 10-K:
Cash & cash equivalents \~$55 M
Marketable securities (current) \~$200 M
Marketable securities (non-current) \~$530 M
Expected tax refunds by year end \~$106 M
Effective liquidity \~$800 M+
Total debt Minimal
Management guided to ending 2025 with around $800M in cash and investments assuming those tax refunds come through. At \~30.9M shares outstanding thats still roughly $26/share sitting in the vault. Stock is $23. Your getting paid to take the operating business.
The Operating Business Mr. Market Is Giving Away
This is where it gets hard to explain why Mr. Market is still asleep.
Q1 2025: $73.5M core revenue, +16% YoY, beat estimates
Q2 2025: $81.7M core revenue, +16% YoY, beat estimates
Q3 2025: $84.1M revenue, +17% YoY, beat by \~$3M
Non GAAP EPS in Q3 was $0.14 versus a consensus estimate of negative $0.22. Thats a $0.36 beat. They raised full year guidance twice, from $310M to $320M to $325M. Non GAAP full year EPS guided to $0.30.
Remember in Round 6 when I pointed out that management was projecting the cash pile would start growing again? Thats still the trajectory. The core business is reaching a scale where it can fund itself and then some.
Whats New Since Round 6
Smart M&A. In December they announced the acquisition of Bako Diagnostics and StrataDx for $55.5M from cash on hand. Bako brings anatomic pathology and proprietary PCR testing. StrataDx adds dermatopathology. Together they nearly double Fulgents pathology sales team, add certified labs in Georgia and Massachussetts, and expand the national footprint. Expected to close H1 2026. This is exactly the kind of disciplined bolt on M&A I outlined as a catalyst back in Round 2. Small bite, strategic fit, funded from the war chest without breaking a sweat.
Product expansion. Ultrarapid whole genome sequencing launched for NICUs. Beacon carrier screening panel expanded from 700 to 1,000 genes. EZOPath, their proprietary digital pathology image management system, launched to integrate AI into workflows. This feeds back into the thesis I laid out in Round 5 about Fulgent being more of a software and informatics play than a pure lab. They keep building the data engine.
Wall Street waking up. UBS upgraded to Buy with a $30 target. Raymond James raised to $36 with an Outperform rating. Piper Sandler raised to $30. CFO Paul Kim bought $1.6M worth of stock. JPMorgan increased their position by 767%. Insider ownership still sits around 31-33%.
The Pullback Is the Opportunity
In Round 6 I talked about the market shifting from a popularity contest to a reality check on Fulgent. That shift started happening. The stock ran from under $20 to the high $20s as the fundamentals forced some recognition. But in a choppy market, small caps with no hype get hit first and recover last. FLGT got dragged back down to $23 not because anything changed with the business but because Mr. Market got nervous about everything and went back to hiding in the popular names.
This is the pattern with overlooked companies. They deliver, the price moves up, the market gets spooked, and the price resets. Meanwhile the business keeps compounding. The gap between price and value widens again and the weighing machine eventually catches up. We’ve seen this movie before with FLGT and we’re watching it again. But it’s my favorite movie because I love a phenomenal deal.
At $23 you are buying the stock for less than the cash on the balance sheet. The core lab business growing mid teens, beating estimates, expanding margins, is free. The therapeutics pipeline with FID-007 and FID-022 in clinical trials is free. The AI and digital pathology platform is free. The $108M+ in cumulative buybacks is free.
The Math
Stock price \~$23
Market cap \~$710 M
Cash & investments \~$800 M
Enterprise value Negative
Core revenue (2025E) \~$325 M
Price/Book \~0.63x
Core revenue growth 16-17% YoY
Insider ownership \~31-33%
Share buybacks since inception \~$108 M
Even a lazy napkin valuation, assign 2x revenue to the lab business (conservative for a double digit grower), thats $650M. Add the $800M cash. Thats $1.45B or roughly $47/share. Thats more than double from here. Assign it something closer to the 5x P/S I discussed in Round 5 for the AI and informatics angle, and the numbers get much larger.
What Im Watching Next
Q4 and full year 2025 earnings come out February 27th, nine days from now. Given managements history of conservative guidance and the momentum through Q3, ill be watching for whether cash actually hits that \~$800M year end target, core revenue trajectory and any 2026 guidance, updates on Bako/StrataDx integration timeline, therapeutics pipeline updates on FID-007 and FID-022, and any acceleration in buybacks.
Bottom Line
Seven rounds in, the thesis hasnt changed much. The numbers have just gotten better. And now the stock is cheaper again. FLGT is a company where Mr. Market is literally paying you to take the operating business off his hands. The business is growing. The M&A strategy is playing out. The AI angle is materializing. Wall Street is starting to pay attention. And the stock just pulled back to below the cash value.
Last time I wrote, I said Mr. Market was waking up. He opened one eye, looked around, got scared by the market noise, and went back to sleep. Thats fine. The weighing machine doesnt care about noise. It just needs time.
DYOR/Long FLGT accumulating