Should You Buy IDEXX Laboratories Stock At Around $350?

IDXX: IDEXX Laboratories logo
IDEXX Laboratories

IDEXX Laboratories stock (NASDAQ: IDXX) has seen a 48% decline this year, faring far worse than an 18% fall for the broader S&P500 index. However, in the longer term, IDXX stock is up 120% from levels seen in late 2017. This marks a significant outperformance over the S&P 500 index, up 47%. After its recent fall, we believe IDXX stock looks attractive, as discussed below.

This 120% growth for IDEX stock since late 2017 can primarily be attributed to 1. the company’s P/S ratio rising 33% to 8.7x trailing revenues, from 6.6x in 2017,  2. IDEXX Laboratories revenue growth of 68% to $3.3 billion over the last twelve months, compared to $2.0 billion in 2017, and 3. a 4% fall in its total shares outstanding. IDEXX has spent $2.2 billion on share repurchases since the end of 2017, resulting in a 4% decline in its total shares outstanding, bolstering its revenue per share metric, which rose 75% to $39.36 now, compared to $22.44 in 2017. Our dashboard on Why IDEXX Laboratories Stock Moved has more details.

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The Covid-19 pandemic has resulted in an increase in pet ownership, as people spent more time at home. In fact, pet ownership in the U.S. rose to 70% of households in 2021 (vs. 67% in 2019). This has boded well for animal health companies, such as IDEXX. The company is also expected to benefit from its new products, including a hematology analyzer – ProCyte One – which can provide blood results in as quickly as five minutes. Its proposed acquisition of ezyVet, a cloud-based software solutions company for veterinary practices, will help IDEXX expand its practice information management system (PIMS) options for veterinary hospitals and other related institutions.

However, there are some near-term headwinds, including rising operating costs and the strengthening dollar, weighing on its overall bottom line expansion in the near term. Despite these headwinds, most prominent Wall Street research firms still have an overweight rating on IDXX stock, with an average of analysts’ price estimate at $492, reflecting a significant 43% upside from its current levels of $344. Given that IDXX stock has corrected meaningfully this year and has strong prospects, we believe that investors will likely be better off using this dip as a buying opportunity for robust gains in the long term.

While IDXX stock looks undervalued, it is helpful to see how IDEXX Laboratories’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

Furthermore, the Covid-19 crisis has created many pricing discontinuities which can offer attractive trading opportunities. For example, you’ll be surprised at how counter-intuitive the stock valuation is for Phibro Animal Health vs. Tri Pointe Homes.

What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016.

Returns Sep 2022
MTD [1]
YTD [1]
Total [2]
 IDXX Return -1% -48% 193%
 S&P 500 Return -1% -18% 75%
 Trefis Multi-Strategy Portfolio -2% -17% 228%

[1] Month-to-date and year-to-date as of 9/5/2022
[2] Cumulative total returns since the end of 2016

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