IDEXX Laboratories Inc (IDXX, Financial) recently gained 2.19% in a day and has seen a 7.11% increase over the past three months. With an Earnings Per Share (EPS) of 9.42, the question arises: is the stock modestly undervalued? This article aims to answer that question by providing a comprehensive valuation analysis. We invite you to delve into the financials and future prospects of IDEXX Laboratories (IDXX).
Company Introduction
IDEXX Laboratories primarily develops, manufactures, and distributes diagnostic products, equipment, and services for pets and livestock. Its key product lines include single-use canine and feline test kits, benchtop chemistry and hematology analyzers, reference lab services, and tests for livestock disease detection and management. The firm also offers vet practice management software and consulting services to animal hospitals, earning close to 40% of its revenue from outside the United States.
With a current share price of $503.89, IDEXX Laboratories (IDXX, Financial) has a market cap of $41.80 billion. The GF Value, our proprietary estimation of fair value, stands at $575.3, suggesting that the stock is modestly undervalued.
Understanding the GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value that the stock should ideally trade at. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
According to our valuation method, IDEXX Laboratories (IDXX, Financial) appears to be modestly undervalued. This suggests that the long-term return of its stock is likely to be higher than its business growth.
Financial Strength
Investing in companies with poor financial strength exposes investors to a high risk of permanent capital loss. To avoid this, it's crucial to research and review a company's financial strength before purchasing shares. Factors such as the cash-to-debt ratio and interest coverage offer insights into its financial health. IDEXX Laboratories has a cash-to-debt ratio of 0.12, ranking it lower than 86.67% of 225 companies in the Medical Diagnostics & Research industry. However, its overall financial strength is rated 7 out of 10, indicating that IDEXX Laboratories is financially stable.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, poses less risk. IDEXX Laboratories has been profitable for 10 out of the past 10 years. Over the past twelve months, the company had a revenue of $3.50 billion and Earnings Per Share (EPS) of $9.42. Its operating margin is 29.82%, ranking better than 95.07% of 223 companies in the Medical Diagnostics & Research industry. Overall, GuruFocus ranks the profitability of IDEXX Laboratories at 10 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of IDEXX Laboratories is 13.1%, ranking better than 56.44% of 202 companies in the Medical Diagnostics & Research industry. The 3-year average EBITDA growth rate is 17.8%, ranking better than 58.42% of 190 companies in the same industry.
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Over the past 12 months, IDEXX Laboratories's ROIC was 34.63, while its WACC came in at 12.29, indicating that the company is creating value for shareholders.
Conclusion
In conclusion, the stock of IDEXX Laboratories (IDXX, Financial) is believed to be modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 58.42% of 190 companies in the Medical Diagnostics & Research industry. For a more detailed analysis of IDEXX Laboratories stock, you can check out its 30-Year Financials here.
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