A Promising, Fast Growing $5 Biotech With Insider Buying

Jul. 9.12 | About: GenMark Diagnostics, (GNMK)

Many of the best performing stocks in my portfolio in the first half of the year were from the biotech area. I believe this sector still offers some interesting opportunities. The outperformance in this space has been driven by some key approvals at the FDA and by solid M&A activity throughout the first six months of the year. The sector has also benefited as it is not impacted by the ongoing crisis in Europe. I believe all of these trends should continue to drive good performance in the second half of the year. I recently came across an interesting company that provides molecular testing tools: GenMark Diagnostics (NASDAQ:GNMK). It has impressive projected sales growth and some recent insider buying as well.

6 reasons GNMK is a good speculative buy at under $5 a share:

  1. Several insiders have picked up $750K worth of new shares at the end of June. They were also active buyers in the second half of 2011.
  2. Only two analysts cover the stock. One has a price target of $7.50 on GNMK and the other is at $12, both substantially above the current stock price. TheStreet upgraded the stock to "Buy" in June.
  3. The company has over 20% of its market capitalization in net cash and more than a year of funding at current burn rates. It is about to raise more than $40mm with a secondary offering as well.
  4. Revenues are increasingly exponentially. The company had revenues of just over $4mm in FY2011 and analysts expect sales north of $15mm in FY2012 and $25mm in FY2013.
  5. Consensus earnings estimates for FY2012 and FY2013 have improved significantly over the past three months. In addition, the company raised revenue guidance for full year 2012 substantially recently.
  6. The stock has good technical support at just under these price levels (see chart).

Click to enlarge
(Click to enlarge)

Disclosure: I am long GNMK.