Is There More Room For Growth In IDEXX Laboratories Stock?

IDXX: IDEXX Laboratories logo
IDEXX Laboratories

IDEXX Laboratories stock (NASDAQ: IDXX) has seen a 33% decline this year, faring far worse than a 16% fall for the broader S&P500 index. However, in the longer term, IDXX stock is up 137% from levels seen in late 2018. This marks a significant outperformance over the S&P 500 index, up around 60%.

This 137% growth for IDXX stock since late 2018 can primarily be attributed to 1. the company’s P/S ratio rising 53% to 11.1x trailing revenues, from 7.3x in 2018,  2. IDEXX Laboratories revenue growth of 49% to $3.3 billion over the last twelve months, compared to $2.2 billion in 2018, and 3. a 4% fall in its total shares outstanding. IDEXX has spent $2 billion on share repurchases since the end of 2018, resulting in a 4% decline in its total shares outstanding, bolstering its revenue per share metric, which rose 55% to $39.68 now, compared to $25.60 in 2018. Our dashboard on Why IDEXX Laboratories Stock Moved has more details.

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The Covid-19 pandemic resulted in an increase in pet ownership as people spent more time at home. Pet ownership in the U.S. rose to 70% of households in 2022 (vs. 67% in 2019). This has boded well for animal health companies, including 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.

IDEXX recently reported its Q3 results with revenue of $842 million, up 4% y-o-y, and earnings of $2.23 on a per share and adjusted basis, up 13% y-0-y, both falling comfortably above the street estimates. This growth was driven by a 14% rise in the installed base of premium instruments. Not only did the company see higher revenues, but it has also consistently improved its operating margins to 27.1% currently, compared to 23.8% in 2018. Our IDEXX Laboratories Operating Income Comparison dashboard has more details.

Although the company is expected to see steady revenue and earnings growth in the future, the company’s management lowered its full-year 2022 earnings outlook to be in the range of $7.74 and $7.98, compared to its prior guidance of $7.77 and $8.05, due to foreign exchange headwinds. Despite the revised outlook, IDXX stock has risen 23% this month.

Given the recent rally in IDXX stock, we believe it is now fully valued. At its current levels of around $440, it is trading at 11x its forward expected revenue of about $40 per share, aligning with its last four-year average. We believe that investors will likely be better off waiting for a dip to enter IDXX for better gains in the long term.

While IDXX stock looks fully valued, 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 Nov 2022
MTD [1]
YTD [1]
Total [2]
 IDXX Return 23% -33% 276%
 S&P 500 Return 3% -16% 78%
 Trefis Multi-Strategy Portfolio 8% -16% 231%

[1] Month-to-date and year-to-date as of 11/14/2022
[2] Cumulative total returns since the end of 2016

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