Hook & thesis (short):
Fulgent Genetics has come a long way from the mid-teens it traded at earlier last year. The stock now sits in the high-20s to low-30s and, in my view, that re-rating largely reflects the market beginning to re-value the firm’s recurring testing revenue and very strong balance sheet. That said, the price move has mostly caught up to intrinsic value — and that makes FLGT a trade, not a blind buy-and-hold. I like the stock from a risk/reward perspective at current levels, but only with a disciplined entry, stop and target plan.
Why the market should care - the business in one paragraph:
Fulgent is a clinical and technical laboratory services company that provides genetic testing and interpretation to physicians and health systems, and it also runs a therapeutic development arm. The lab business generates the vast majority of revenue and is the cash engine: recent quarters show revenues in the $73M-$85M range, gross profit margins north of 40% and meaningful operating cash flow. The balance sheet is unusually strong for a small-cap diagnostics name, with equity on the balance sheet above $1.1B and current assets north of $500M, giving Fulgent the runway to weather legal noise and invest in higher-margin offerings or R&D.
The numbers that matter (recent trends):
- Revenue: Q3 FY2025 revenue was $84.07M, up versus Q1 FY2025 ($73.46M) and Q2 FY2025 ($81.80M) - a trend of steady sequential growth across 2025 quarters.
- Gross profit: Q3 FY2025 gross profit came in at $35.51M, implying a gross margin around 42% (35.51/84.07).
- Profitability: The company reported an operating loss in the most recent quarter (-$15.35M) driven by elevated operating expense, and a GAAP net loss attributable to parent of roughly -$6.61M in Q3 FY2025. Non-operating items (a $7.84M positive in Q3) offset some operating losses.
- Cash flow & balance sheet: Fulgent generated operating cash flow of roughly $11.11M in the most recent quarter and positive net cash flow ($29.76M) for that quarter. Balance sheet snapshot shows total assets of ~$1.21B, equity of ~$1.12B, current assets ~$507M and current liabilities of ~$72M.
- Share count and market cap estimate: Using diluted average shares of ~30.75M and the last quoted price (~$28.90), implied market capitalization is roughly $890M (30.75M * $28.9). That places the stock below book value (equity ~$1.12B), which is noteworthy for a diagnostics company generating recurring revenue.
Valuation framing - why ‘price has caught up to value’:
Back-of-envelope math helps: annualizing the most recent quarter ($84.07M) gives an implied revenue run-rate near $336M. With an implied market cap of ~ $890M, the stock trades at ~2.6x market cap / revenue run-rate. That multiple is reasonable for a diagnostic company with moderate growth but elevated operating costs and legal/legal-overhang risk. The market is no longer giving Fulgent a generous growth multiple it enjoyed during earlier expansions; instead it’s pricing a mature lab with solid recurring revenue but margin pressure and headline risk. Importantly, the company’s book equity (~$1.12B) exceeds the market cap — meaning investors are effectively buying the operating business and a large net asset base at a discount, a dynamic that supports a tactical long.
Catalysts that can re-rate the stock (2-5):
- Improving operating leverage - evidence of margin recovery via cost controls or higher-margin test mix that turns reported operating losses into small operating profits.
- Resolution or clarity on investigations - the company has faced several law firm inquiries; a clean resolution or constructive settlement would remove a headline overhang and could meaningfully compress risk premium.
- Therapeutics progress or partnership announcements - any tangible clinical progress or licensing of its therapeutics pipeline could unlock upside optionality beyond the lab business.
- Better-than-expected quarterly revenue / guidance - a sustained cadence of sequential revenue beats and upward guidance would support multiple expansion from current ~2.6x revenue run-rate.
Trade idea - actionable plan:
Trade direction: Long (tactical, not buy-and-forget).
Time horizon: Position - 3 to 12 months with active monitoring of catalysts above.
Entry: Primary entry 26.00-29.00. If the stock pulls back to the low-20s, add size opportunistically (26.00 is my recommended first fill zone; sub-24.00 is opportunistic accumulation for risk-tolerant investors).
Stop: 23.00 on a full position (roughly 15-20% below the 26.00 entry band). Tighten stops to 25.00 if entering near 29.00 to manage drawdown.
Targets:
- Target 1 (near term): $36.00 - tactical take-profit level (~25%-35% upside from current levels) if margins show improvement or legal headline risk fades.
- Target 2 (medium term): $45.00 - represents ~55%-75% upside and assumes genuine operating leverage + 3-4x revenue multiple compression back toward higher peer-like multiples if growth accelerates or legal risks dissipate.
Position sizing: keep any single position to a size where a stop at $23 represents a comfortable portfolio loss (I would size this as a small to medium position relative to total portfolio risk due to headline/legal risk and quarter-to-quarter earnings variability).
Risks and counterarguments (balanced):
- Regulatory / legal overhang: Multiple law firms have announced investigations and there’s been press around DOJ/false claims — an adverse finding, civil penalty or protracted investigation could materially hurt revenue and sentiment.
- Profitability pressure: The company recorded operating losses for recent quarters (e.g., -$15.35M operating loss in Q3 FY2025). If higher operating expenses or lower-margin test mix persist, valuation multiples should compress further.
- Therapeutic R&D is optionality, not a revenue driver yet: The therapeutics segment is early-stage and may consume capital/time before generating meaningful returns.
- Sentiment and multiple contraction: Even with stable revenue, the stock could languish if the market persists in assigning discount multiples to small-cap diagnostics companies because of sector risk or broader market rotations.
- Counterargument: One could argue the stock has already re-rated appropriately and a meaningful portion of upside remains contingent on removing legal overhangs — in that sense, price may be fair and further upside is binary. That is a valid view and is why I recommend a tactical approach with strict stops.
What would change my mind (reasons to stop being constructive):
- Material deterioration in revenue run-rate (several quarters of sequential declines) or evidence tests volumes are structurally impaired.
- Adverse legal/judicial outcomes that carry large fines or disqualify participation in payer programs, materially impairing access to revenue.
- Balance-sheet impairment or significant cash burn that shifts the firm from net cash-generator to capital-raising mode without a credible long-term plan.
Bottom line / Conclusion:
Fulgent sits at an attractive tactical point: the stock has recovered meaningfully from prior lows and the market now prices a business with an $80M+ quarterly revenue base, solid gross margins, positive operating cash flow and a balance sheet that shows equity materially higher than market cap. Those facts justify a constructive stance, but headline/legal risk and recent GAAP losses argue for discipline. I favor a position built on weakness inside $26-$29 with a protective stop at $23, partial profit-taking near $36 and a stretch target around $45 if operating leverage materializes and legal overhangs clear. Keep size modest relative to total portfolio risk and re-evaluate on quarterly margin trajectory or any legal resolution.
Key monitoring items: quarterly revenue/gross margin trends, quarterly operating expense cadence, cash flow from operations, and outcome/updates on investigations.
Dates & context: This view uses company financials through the quarter ending 09/30/2025 and market price data current as of 01/27/2026.
Disclosure: This article is for informational purposes and not investment advice. The trade plan above reflects a tactical, risk-controlled long. Investors should size positions to their own risk tolerance and consult a licensed financial advisor if needed.