IDEXX Laboratories Inc (IDXX, Financial) has experienced a daily loss of -6.06%, a 3-month loss of -28.87%, and an Earnings Per Share (EPS) of 9.42 as of November 01, 2023. The question that arises is, given these metrics, is the stock significantly undervalued? This comprehensive analysis aims to provide an answer, offering an in-depth look at the company's valuation, financial strength, profitability, and growth prospects. Read on for a thorough valuation analysis of IDEXX Laboratories Inc (IDXX).
Company Introduction
IDEXX Laboratories primarily develops, manufactures, and distributes diagnostic products, equipment, and services for pets and livestock. The company's 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. IDEXX also offers vet practice management software and consulting services. The company garners close to 40% of its revenue from outside the United States.
The company's stock price stands at $375.24, while its GF Value, an estimation of fair value, is $584.18. This analysis will delve deeper into the company's value, providing a comprehensive financial assessment integrated with essential company details.
Understanding GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the stock's fair trading value.
According to GuruFocus' valuation method, IDEXX Laboratories (IDXX, Financial) is significantly undervalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment factor based on past business growth, and analyst estimates of future business performance. If the stock's price is significantly above the GF Value Line, the stock may be overvalued, and future returns may be poor. Conversely, if the stock's price is significantly below the GF Value Line, the stock may be undervalued, and future returns may be high.
At its current price of $375.24 per share, IDEXX Laboratories has a market cap of $31.10 billion and is believed to be significantly undervalued. As such, the long-term return of its stock is likely to be much higher than its business growth.
Link: These companies may deliver higher future returns at reduced risk.
Financial Strength
Investing in companies with low financial strength can result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy shares. Looking at the cash-to-debt ratio and interest coverage can provide a good initial perspective. IDEXX Laboratories has a cash-to-debt ratio of 0.12, which ranks worse than 86.73% of 226 companies in the Medical Diagnostics & Research industry. Based on this, GuruFocus ranks IDEXX Laboratories's financial strength as 7 out of 10, suggesting a fair balance sheet.
Profitability and Growth
Investing in profitable companies, especially those with consistent long-term profitability, poses less risk. A company with high profit margins is typically a safer investment than one with low profit margins. IDEXX Laboratories has been profitable 10 years over the past decade. Over the past twelve months, the company had revenue of $3.50 billion and Earnings Per Share (EPS) of $9.42. Its operating margin is 29.82%, which ranks better than 96.04% of 227 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 probably one of the most important factors in the valuation of a company. If a company's business is growing, it usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. IDEXX Laboratories's 3-year average revenue growth rate is better than 56.22% of 201 companies in the Medical Diagnostics & Research industry. Its 3-year average EBITDA growth rate is 17.8%, which ranks better than 59.78% of 184 companies in the same industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, IDEXX Laboratories's ROIC was 34.63, while its WACC came in at 13.41.
Conclusion
In conclusion, IDEXX Laboratories (IDXX, Financial) stock is believed to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 59.78% of 184 companies in the Medical Diagnostics & Research industry. To learn more about IDEXX Laboratories stock, you can check out its 30-Year Financials here.
To find out high-quality companies that may deliver above-average returns, please check out GuruFocus High Quality Low Capex Screener.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
