Personal Finance

Why Investors Are Paying a Premium for Ilumina, Inc.

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Now that the average stock in the benchmark S&P 500 is trading at about 25 times trailing earnings, it's hard to find great companies people aren't paying a premium to own. Priced at about 53 times trailing earnings, though, shares of Illumina, Inc. (NASDAQ: ILMN) stand head and shoulders above an already expensive crowd.

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Image source: Getty Images.

On the other hand, I could be wrong about low-cost demand going forward; after all, we are in uncharted waters here. If Illumina stock falls to the same P/E ratio as the average stock in the broad market S&P 500 index (about 25 times trailing earnings) in the near term, a purchase at recent prices could result in a 53% loss.

Illumina intends to begin shipping the $985,000 NovaSeq 6000 in March, and the $850,000 NovaSeq 5000 in the middle of the year. One thing is certain: The stock will soar or swoon on news of their uptake. If you don't have an iron stomach, I suggest waiting for a pullback or a clear signal the lower-cost sequencers are indeed a game changer.

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Cory Renauer has no position in any stocks mentioned. You can follow Cory on Twitter @coryrenauer or LinkedIn for more healthcare investing insight.The Motley Fool owns shares of and recommends Illumina. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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