September 4, 2008 - Illumina, Inc. (ILMN-NASAQ) engages in the development, manufacture, and marketing of integrated systems for the analysis of genetic variation and biological function. It provides a line of products and services that serve the sequencing, genotyping, and gene expression markets.

The company also provides BeadStation, a system for performing genotyping, which comprises BeadArray Reader, a scanning instrument that uses a laser to read the results of experiments that are captured in its instruments and genotyping and/or gene expression analysis software; and oligos, which are components of the reagent kits for its BeadArray products and are used for assay development. In addition, the company develops and commercializes genetic analysis technologies used for various analyses, including whole genome resequencing, gene expression analysis, and RNA analysis.

It has collaborations with Invitrogen Corporation for the manufacture, marketing, and distribution of oligos; and deCODE genetics, ehf. to develop and commercialize diagnostic tests for variants in genes involved in disease related pathways linked to heart attack, type 2 diabetes, and breast cancer. The company was founded in 1998 and is headquartered in San Diego,California.

In 2003, you could have bought as much of this stock as you wanted for $1.70 a share. Now it trades at $85, taking a break from its recently hit, all-time high of $95.80. In 2005, it was still losing money, at the rate of 2 cents a share. In 2000, it lost $3.91 a share. But all that's changed. For the better.

Beginning in 2006, the company made $.80 a share, followed by 82 cents last year. But it's this year and next that has the stock jumping. Analysts predict $1.26 and then $1.82 for 2009. For the September quarter, they see 33 cents a share, up from 25 cents last year. In December, the number is 35 cents compared to 28 cents last year.

Revnues have ramped as well. Starting in 2005, they were $73.5 million, followed by $184.5 million. Then they almost doubled to $366.8 million. This year, analysts see $580 million and next year, $700 million. Revenues have grown each quarter for the last 28.

The drivers behind these stellar numbers have been new products, some technology acquisitions and higher market share. In early 2007, Illumina bought Solexa which specialized in gene sequencing. Recently, the company added Avantome which has compelmentary, long read-length sequencing technology. In the latest quarter, one Illumina product showed real strength: the next generation Genome Analyzer. Also for the quarter, record sales were reported in the Infinium High-Density group. Consumables (like razor blades to a razor) sales jumped by 78% to $82 million thanks to a larger installed base of machines.

To show the enthusiasm investors have for this company, a recent stock offering of 4 million shares was done at a price of $87.50, to give the company proceeds of $342.6 million. Most stocks would have a hard time placing that many shares at that price with earnings of only $1.11 for the trailing 12 months.

Other numbers: Market cap is $4.82 billion with 57.16 million shares outstanding. The price to earnings ratio (P/E) is a staggering 128, but the forward p/e is a somewhat more moderate 47. Price to Sales is 10.5. Price to Book is 10. Profit margin is 8.32 with an Operating margin of 17.88. Return on equity is 10%. Debt to Equity is .81. There is no dividend. Institutions own most of the shares.

Illumina has skyrocketed to new heights recently, thanks to earnings. That fuel should keep coming as the company offers new products and supplies an ever increasing number of installed instruments with necessary diagnostic tools. But at some point investors have to be a bit wary. Nothing goes to the sky, and this stock is almost touching it now. While the numbers look great, investors have already bid these shares to levels that make the prudent investor pause.

- Company Web site: www.illumina.com

- Ted Allrich