Predictive Oncology Q2 EPS 22c, down from 53c YoY, revenue at $2,682, down from $67,255 YoY.

Predictive Oncology reported Q2 EPS of 22 cents, beating the loss of 53 cents last year. Revenue was $2,682, compared to $67,255 last year. The company is focused on validating its proprietary technologies, strengthening its financial position, and expanding the availability of its ChemoFx live-cell tumor profiling assay. It has also partnered with Yorkville Advisors for a share purchase agreement.

Castle Biosciences, Inc. ($CSTL), a leading developer of diagnostic tests for cancer, has recently reported strong financial performance, demonstrating its potential as a promising investment. The company's focus on gene expression profiling tests, particularly for melanoma, has positioned it as a key player in the predictive oncology market.

Financial Performance

Castle Biosciences has consistently shown robust revenue growth, with a compound annual growth rate (CAGR) of approximately 50% since 2020. In 2022, the company reported revenues of $137 million, growing to $220 million in 2023. This growth is underpinned by high gross margins, averaging around 80% since 2020. Despite increased operating expenses, particularly in sales and research and development (R&D), Castle Biosciences has maintained a disciplined approach, ensuring sustainable growth.

The company's adjusted EBITDA has turned positive, with a first-half 2025 figure of $23 million. This indicates that Castle Biosciences is moving closer to profitability, a significant milestone for a biotech company. Moreover, the company boasts a strong balance sheet, with $275 million in cash and minimal debt, providing a substantial net cash position of approximately $8 per share.

Valuation

Despite its impressive financial performance, Castle Biosciences' stock valuation appears undervalued. At the time of writing, the stock trades at around 1x annual revenue and 0.9x enterprise value/sales basis. This valuation is notably lower compared to many diagnostics or biotech companies with similar growth profiles. Wall Street analysts seem to agree, with an average price target of around $35-$38, representing a significant upside potential.

Recent Headwinds

Castle Biosciences has faced some recent challenges that have temporarily impacted its stock price. In Q1 2025, the company reported a net loss of $25.8 million, largely due to the discontinuation of its IDgenetix test line. This one-time accounting charge, however, does not reflect the company's underlying operating performance. In Q2 2025, Medicare pulled coverage for the DecisionDx-SCC test, which could impact revenue. However, Castle Biosciences is actively working to reverse these decisions, indicating that these challenges may be temporary.

Conclusion

Castle Biosciences' strong financial performance, high gross margins, and disciplined spending on SG&A and R&D position it as a promising investment. Despite recent headwinds, the company's long-term prospects and undervalued stock price suggest potential upside. Investors should closely monitor the company's efforts to resolve the Medicare reimbursement issue and continue to watch its financial performance.

References

[1] https://www.reddit.com/r/ValueInvesting/comments/1mraspy/i_feel_like_more_people_should_talk_about_this/