Genetic testing company Natera (NASDAQ:NTRA). announced better-than-expected revenue in Q1 CY2025, with sales up 36.5% year on year to $501.8 million. The company’s full-year revenue guidance of $1.98 billion at the midpoint came in 3.1% above analysts’ estimates. Its GAAP loss of $0.50 per share was 21.4% above analysts’ consensus estimates.

Is now the time to buy Natera? Find out in our full research report.

Natera (NTRA) Q1 CY2025 Highlights:

Revenue: $501.8 million vs analyst estimates of $446.1 million (36.5% year-on-year growth, 12.5% beat) EPS (GAAP): -$0.50 vs analyst estimates of -$0.64 (21.4% beat) The company lifted its revenue guidance for the full year to $1.98 billion at the midpoint from $1.91 billion, a 3.7% increase Operating Margin: -15.8%, up from -20.2% in the same quarter last year Sales Volumes rose 28.9% year on year (17.2% in the same quarter last year) Market Capitalization: $21.77 billion

“We delivered another strong quarter, with volume growth across the business, including a record growth quarter for Signatera,” said Steve Chapman, chief executive officer of Natera.

Company Overview

Founded in 2003 as Gene Security Network before rebranding in 2012, Natera (NASDAQ:NTRA) develops and commercializes genetic tests for prenatal screening, cancer detection, and organ transplant monitoring using its proprietary cell-free DNA technology.

Sales Growth

A company’s long-term sales performance is one signal of its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Luckily, Natera’s sales grew at an incredible 40.9% compounded annual growth rate over the last five years. Its growth surpassed the average healthcare company and shows its offerings resonate with customers, a great starting point for our analysis.Natera Quarterly Revenue

Long-term growth is the most important, but within healthcare, a half-decade historical view may miss new innovations or demand cycles. Natera’s annualized revenue growth of 45.3% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.Natera Year-On-Year Revenue Growth

Natera also reports its number of tests processed, which reached 855,100 in the latest quarter. Over the last two years, Natera’s tests processed averaged 24.3% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.Natera Tests Processed

This quarter, Natera reported wonderful year-on-year revenue growth of 36.5%, and its $501.8 million of revenue exceeded Wall Street’s estimates by 12.5%.

Looking ahead, sell-side analysts expect revenue to grow 9.4% over the next 12 months, a deceleration versus the last two years. Still, this projection is healthy and implies the market is forecasting success for its products and services.

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Operating Margin

Natera’s high expenses have contributed to an average operating margin of negative 38.6% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out.

On the plus side, Natera’s operating margin rose by 42 percentage points over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its recent improvements as the company’s margin has increased by 50.1 percentage points on a two-year basis. These data points are very encouraging and shows momentum is on its side.Natera Trailing 12-Month Operating Margin (GAAP)

In Q1, Natera generated a negative 15.8% operating margin.

Earnings Per Share

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 Natera’s full-year earnings are still negative, it reduced its losses and improved its EPS by 5.1% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability. We hope to see an inflection point soon.Natera Trailing 12-Month EPS (GAAP)

In Q1, Natera reported EPS at negative $0.50, up from negative $0.56 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 expects Natera to perform poorly. Analysts forecast its full-year EPS of negative $1.47 will tumble to negative $1.82.

Key Takeaways from Natera’s Q1 Results

We were impressed by how significantly Natera blew past analysts’ sales volume expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 1.6% to $165.50 immediately following the results.

Natera put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.

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