Illumina Q1 - Still Growing

On Thursday night one of our new additions to the Vestact portfolio, Illumina, reported their Q1 numbers. In case you have forgotten, Illumina is the leading company producing gene sequencing machines.

For the first quarter, revenues grew 8% and earnings grew 10%, both ahead of expectations. Given that gene sequencing is still in its early growth phase, Illumina spends 20% of its revenue on R&D! The goal is to bring down the cost of each machine, which will allow this technology to go more mainstream.

As it stands, the expectation is for this industry to have sales of $20 billion in 2020, which in the grand scheme of things is not very big. Especially if you consider how huge this technology can be for the human race going forward. Think about how medicine will change if we know beforehand what genes could be leading to certain diseases? How long until we see medicine that is tailored to your DNA? What about having a diet tailored specifically for you? Then on the more fun side, are you one of the 0.5% of men descended from Genghis Khan?

The guidance from the company currently has the share trading at over 40 times its future earnings. Not cheap, especially if you consider that they only grew profits by 10%. The reason to own them though is for the explosive growth coming from the gene sequencing industry. Illumina is the leading provider of machines and should capture the bulk of the future market growth. As the market grows, their production costs should come down, coupled with lower R&D spend as a percentage of revenues. All this points towards high potential profits in the years to come, and good returns for shareholders.