How EXACT SCIENCES CORP Stacks Up in Quantitative Growth Analysis

When it comes to picking growth stocks with solid fundamentals, quantitative screening becomes your best friend. That’s exactly what happened with EXACT SCIENCES CORP (EXAS), a large-cap biotech play that caught the attention of quantitative investment models based on Partha Mohanram’s proven P/B Growth Investor framework.

The Quantitative Verdict: 66% Strong Fundamentals Score

In the Biotechnology & Drugs sector, EXAS earned a 66% rating when evaluated through Mohanram’s growth model. While this sits below the 80% threshold that typically signals strong interest from quantitative strategies, it still represents solid fundamental strength. The stock’s valuation and underlying business metrics place it firmly in the consideration zone for investors hunting low book-to-market stocks with genuine growth potential.

What the Numbers Show: Breaking Down the Quantitative Metrics

The quantitative analysis reveals a mixed but interesting profile. On the positive side, EXAS passes several critical tests: its book-to-market ratio shows attractive valuation, return on assets demonstrates operational efficiency, and cash flow generation from operations relative to total assets validates business quality. The company’s operational cash flow efficiency also compares favorably against returns on assets, suggesting earnings quality isn’t inflated by accounting practices.

However, the quantitative model identifies three areas needing attention. The firm’s advertising spending relative to assets, capital expenditure intensity, and R&D investment ratio all triggered flags in the screening criteria. For a biotech company, elevated R&D spending typically signals investment in future growth, though the quantitative model weights this as a constraint.

Understanding Mohanram’s Quantitative Framework

Partha Mohanram’s research flipped conventional wisdom on its head. While academic studies historically showed value investing beats growth investing, his quantitative work proved that specific criteria can identify which growth stocks actually maintain their upward trajectory. His landmark research paper “Separating Winners from Losers among Low Book-to-Market Stocks using Financial Statement Analysis” created a data-driven methodology that produces measurable market outperformance.

Mohanram, now holding the John H. Watson Chair in Value Investing at the University of Toronto, developed this quantitative model by analyzing which financial statement patterns distinguish sustained growth from temporary spikes. This approach moves beyond simple momentum, incorporating variance analysis on both returns and sales to identify genuine business resilience.

What This Means for Your Portfolio

EXAS’s 66% quantitative score places it in the moderate-strength category—worth researching further if you’re building a growth-oriented portfolio, but not an automatic buy signal. The quantitative model essentially flags it as a stock worthy of deeper fundamental digging, particularly if you’re comfortable with the biotech sector’s inherent R&D intensity.

For investors applying quantitative methods, EXAS demonstrates that real diligence still matters. Numbers tell a story, but the story isn’t always a clear yes or no.