For years, the biotech sector has been an amazing place to be an investor. If we look at two of the most popular ETFs tracking the space, IBB and FBT, both have nearly doubled over the past two years compared to more modest gains of nearly 30% for the S&P 500.

Recent trading has been a bit rockier as concerns are starting to build over some growth stocks in the market. And with the kind of outperformance for the sector outlined above, it isn’t too surprising to see that the biotech sector is among the biggest targets.

However, there are some companies out there in this space that may now be solid choices and this could be an excellent time to buy up a few well positioned ones after the recent dip. A great selection that fits this bill is Illumina (ILMN - Analyst Report) as this biotech stock is underperforming from a three month look but it still has excellent long term potential.

Illumina in Focus

Illumina is a leader in genetic analysis specifically in sequencing genomes and using that information to fight disease. The company has a near monopoly in the field as its machines now account for roughly 90% of all DNA data produced in what could quickly become a vital corner of the health market.

ILMN has already seen revenue growth of about 28% year-over-year for the most recent quarter, while operating margins are soaring and are now approaching nearly 40% too.  And for the full year, the company expects 20% revenue growth and EPS between $3.36-$3.42/share, a nice 25% move higher than last year’s $2.74/share.

Clearly with this kind of growth projection investors should take the recent sluggish stock price movement in stride. This is especially true if investors look to recent earnings estimate revisions from analysts who closely follow this company.

Recent Estimates

Analysts tracking ILMN definitely haven’t been swayed by the recent underperformance as in the past 30 days 15 estimates have gone higher for the current year and 14 higher for the next year compared to zero lower for both time frames.

The movement in the consensus estimate has also been impressive as we have seen a nice increase for both the current year and the next year time frames. In the past 30 days, it was a 22 cent increase for the current year and then a 19 cent increase for the next year time period, so it isn’t like analysts have only been raising by a cent or two, believing that ILMN’s outlook merits a bit more optimism.

And before you start worrying about ILMN living up to loftier expectations, consider that the company has beaten estimates by double digits in each of the last four quarters producing an average surprise of 21% for the time frame. No wonder ILMN has earned itself a top Zacks Rank #1 (Strong Buy), something that just five percent of all stocks in our universe receive.

Bottom Line

ILMN is a top ranked stock in a quickly growing industry. While the company has gone through a rough patch recently, its growth prospects remain incredibly solid.

So trust in the potential of the DNA sequencing space and recent analyst estimate revisions if you are looking for a great pick in the biotechnology market. This seems like a good buying opportunity for ILMN, and for those who may have missed the boat on this somewhat under-the-radar stock up until now.

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