Exact Sciences (EXAS)

Diagnostic company Exact Sciences Corporation (NASDAQ:EXAS) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 20% year on year to $850.7 million. The company’s full-year revenue guidance of $3.23 billion at the midpoint came in 2.2% above analysts’ estimates. Its non-GAAP profit of $0.24 per share was 49.4% above analysts’ consensus estimates.

Company Overview

With a mission to detect cancer earlier when it's more treatable, Exact Sciences (NASDAQ:EXAS) develops and markets cancer screening and diagnostic tests, including its flagship Cologuard stool-based colorectal cancer screening test.

Over the next few years, immuno-oncology companies, which harness the immune system to fight illnesses such as cancer, faces strong tailwinds from advancements in precision medicine (including the use of AI to improve hit rates) and growing demand for treatments targeting rare diseases. However, headwinds such as rising scrutiny over drug pricing, regulatory unknowns, and competition from larger, more resourced pharmaceutical companies could weigh on growth.

Exact Sciences faces competition from various diagnostic companies in different segments of its business. In colorectal cancer screening, competitors include Guardant Health (NASDAQ:GH) with its blood-based Shield test, Freenome, and traditional screening methods offered by Laboratory Corporation of America (NYSE:LH) and Quest Diagnostics (NYSE:DGX). In precision oncology, the company competes with Veracyte (NASDAQ:VCYT), Myriad Genetics (NASDAQ:MYGN), Natera (NASDAQ:NTRA), and Hologic (NASDAQ:HOLX).

Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.

With $3.08 billion in revenue over the past 12 months, Exact Sciences has decent scale. This is important as it gives the company more leverage in a heavily regulated, competitive environment that is complex and resource-intensive.

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Exact Sciences grew its sales at an impressive 18.5% compounded annual growth rate. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Exact Sciences’s annualized revenue growth of 13.2% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

Exact Sciences also reports sales performance excluding currency movements, which are outside the company’s control and not indicative of demand. Over the last two years, its constant currency sales averaged 13.2% year-on-year growth. Because this number aligns with its normal revenue growth, we can see that Exact Sciences has properly hedged its foreign currency exposure.

This quarter, Exact Sciences reported robust year-on-year revenue growth of 20%, and its $850.7 million of revenue topped Wall Street estimates by 5%.

Looking ahead, sell-side analysts expect revenue to grow 12% over the next 12 months, similar to its two-year rate. Still, this projection is commendable and implies the market is forecasting success for its products and services.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Exact Sciences’s high expenses have contributed to an average operating margin of negative 27.2% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

On the plus side, Exact Sciences’s operating margin rose by 27.2 percentage points over the last five years, as its sales growth gave it operating leverage. Zooming into its more recent performance, however, we can see the company’s margin has decreased by 21.4 percentage points on a two-year basis. If Exact Sciences wants to pass our bar, it must prove it can expand its profitability consistently.

In Q3, Exact Sciences generated a negative 3% operating margin.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Exact Sciences’s full-year earnings are still negative, it reduced its losses and improved its EPS by 48.5% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

In Q3, Exact Sciences reported adjusted EPS of $0.24, up from negative $0.13 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Exact Sciences’s full-year EPS of negative $0.08 will flip to positive $0.89.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

While Exact Sciences posted positive free cash flow this quarter, the broader story hasn’t been so clean. Exact Sciences’s demanding reinvestments have consumed many resources over the last five years, contributing to an average free cash flow margin of negative 2%. This means it lit $2.00 of cash on fire for every $100 in revenue.

Taking a step back, an encouraging sign is that Exact Sciences’s margin expanded by 11.4 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise.

Exact Sciences’s free cash flow clocked in at $190 million in Q3, equivalent to a 22.3% margin. This result was good as its margin was 6.5 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Exact Sciences’s five-year average ROIC was negative 13.6%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Exact Sciences’s ROIC averaged 4.5 percentage point increases each year. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

Exact Sciences reported $1.00 billion of cash and $2.49 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $412.3 million of EBITDA over the last 12 months, we view Exact Sciences’s 3.6× net-debt-to-EBITDA ratio as safe. We also see its $10.29 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

It was good to see Exact Sciences beat analysts’ revenue and EPS expectations convincingly this quarter. Full-year revenue guidance was raised, and full-year EBITDA guidance came in ahead of expectations. Zooming out, we think this quarter featured some important positives. The stock traded up 6.9% to $71.65 immediately following the results.

Updated: December 3, 2025 at 11:08 PM EST

Before making an investment decision, investors should account for Exact Sciences’s business fundamentals and valuation in addition to what happened in the latest quarter.

Exact Sciences isn’t a bad business, but we’re not clamoring to buy it here and now. First off, its revenue growth was impressive over the last five years. And while Exact Sciences’s relatively low ROIC suggests management has struggled to find compelling investment opportunities, its rising cash profitability gives it more optionality.

Exact Sciences’s P/E ratio based on the next 12 months is 120x. This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment.

Wall Street analysts have a consensus one-year price target of $103.67 on the company (compared to the current share price of $100.99).