Impact on profit margins
The back‑to‑back record months for CyPath® Lung indicate that bioAffinity Technologies is moving from a niche, low‑volume product into a scale‑up phase. Because the test is a high‑margin diagnostic (the company’s cost of goods sold is largely fixed per kit), the surge in unit volume should translate into a gross‑margin uplift. Assuming the incremental sales are largely incremental revenue rather than a shift of existing customers to a higher‑priced tier, the cost‑per‑test will fall further as fixed manufacturing and distribution expenses are spread over a larger base, nudging the gross margin up by a few percentage points.
On the operating‑margin side, the company still bears sizable R&D and commercial‑roll‑out costs (sales‑force expansion, payer‑reimbursement work, and marketing). However, the recent sales acceleration is likely to be absorbed by these programs, meaning the net‑margin impact will be modest in the short term. If the growth trajectory holds and the company can keep SG&A spend in line with revenue, we can expect a mid‑single‑digit expansion in operating margin over the next 12‑18 months, which should be reflected in a higher EPS outlook and a positive price reaction.
Trading implications
- Short‑term: The market will likely price in the margin boost already, so the stock may have a modest upside (≈5‑8 %) as the news confirms the revenue trajectory. A breakout above the recent high (~$2.30) could signal the market’s acceptance of expanding margins.
- Medium‑term: If the company sustains the sales momentum and demonstrates disciplined cost control, a re‑rating of the earnings multiple is plausible. Consider a buy on dips if the price retreats to the 20‑day moving average (~$2.10) with volume support, targeting a 12‑month upside to $2.70‑$2.80 as margin expansion materialises. Keep an eye on any guidance updates on R&D spend or pricing pressure that could temper the margin upside.