Guardant Health, Inc. (GH) stock intrinsic value fair value estimate & owner earnings analysis

Guardant Health sells blood-based cancer tests: Guardant360 and Reveal for people already diagnosed and for drug developers, and Shield, an FDA-approved colorectal cancer screening test that Medicare has covered since August 2024. Revenue has grown every year, from $214 million in 2019 to $982 million in 2025, and Shield alone delivered about 87,000 tests and $79.7 million of revenue in 2025. The business has never produced positive cash earnings, though. Our measure of earnings is cash from operations, less working-capital swings, less stock-based compensation (a real cost paid in shares), less the part of capital spending needed to stay in business. On that basis the company lost about $(0.72) per share in 2019, $(2.35) in 2020, $(3.81) in 2021, $(5.24) in 2022, $(4.27) in 2023, $(2.74) in 2024 and $(2.87) in 2025 (roughly $360 million in 2025). The loss narrowed sharply from 2022 to 2024 but was flat in 2025 as stock compensation rose to $166 million, and cash from operations in the first half of 2026 (-$123 million) was the same as in the first half of 2025 even though revenue grew about 46%. Owner earnings grew by about -5% in 2025 (from -$2.74 to -$2.87 per share, i.e. slightly worse); the base case assumes no improvement that is not already in the record. We do not add the roughly $1.3 billion of cash and securities to the value, and we do not subtract the convertible notes, which total about $1.49 billion of principal ($490.7 million of 2027 notes remaining after the 2025 exchange, $600 million due 2031 and $402.5 million due 2033). Cash funds the losses, and the notes are a claim that leaves less for shareholders if losses continue. Bear case ($0 per share): losses of roughly $300-360 million a year continue, the cash pile is consumed, and further funding costs existing holders through dilution or through convertible notes ranking ahead of shares. Nothing in the record shows a path to profit that survives that outcome, so the shares are worth nothing. Base case ($0 per share): revenue growth continues (20% to 33% a year over 2021-2025) and losses relative to revenue keep narrowing at half the recent pace, but the burn takes about eight years to reach break-even and the cumulative losses along the way exceed any profit we can evidence afterward. We credit no profit level the company has not yet reached in any year. The result is negative on paper; we floor it at zero because shareholders are not required to fund the losses, and the company's cash covers them for now. Bull case ($20 per share): revenue growth of 25% fading to 2%, Shield volume building on its Medicare coverage, and the loss margin improving by about 8 points a year (as it did in 2024, when it improved by roughly 39 points, and again in the first half of 2026) until owner earnings reach about 10% of revenue in the early 2030s, then stay flat with no further growth. That yields roughly $280 million a year at the end of the decade. What would make this estimate wrong: the improvement in margins depends on operating leverage the company has shown for only two years. If it stalls, even the bull case falls. If Shield adoption and cost control lift margins faster than we assume, values could be well above the base. A small legal accrual of $83.4 million in 2023 affected working capital in that year; we treated it as part of the working-capital swing and did not carry it forward. The earlier-year working capital figures include lease-liability movements as shown in the cash flow statements. The margin-of-safety price is set well below the bull value because the base and bear cases are worth nothing, and it assumes cash earnings turn positive first.