Charles River Laboratories International Inc (CRL, Financial) has experienced a notable daily gain of 5.16%, yet over the past three months, the stock has seen a decline of 10.78%. With an Earnings Per Share (EPS) of 9.24, investors are keen to understand if the stock is significantly undervalued. This article aims to explore the valuation of CRL and provide a detailed analysis for investors. Continue reading to delve into the financial nuances of Charles River Laboratories International and gauge the true worth of its shares.
Company Introduction
Founded in 1947, Charles River Laboratories International Inc is an eminent player in the drug discovery and development services industry. The company boasts a rich history and a robust business model, focusing on providing animal models with specific genetic characteristics for preclinical studies globally. Its services span early drug development processes, including discovery services, and it also offers microbial solutions, biologics testing services, and avian vaccine services. With a current stock price of $187.57 and a Fair Value (GF Value) of $280.12, an intriguing question arises: is Charles River Laboratories International trading at a significant discount?
Summarize GF Value
The GF Value is a unique measure of the intrinsic value of a stock, incorporating historical trading multiples, an adjustment factor based on the company's past performance and growth, and future business performance estimates. The GF Value Line suggests the ideal fair value at which the stock should trade. If a stock's price gravitates significantly above the GF Value Line, it may be overvalued, potentially leading to poorer future returns. Conversely, a price well below the line could indicate an undervalued stock with prospects for higher returns. Currently, Charles River Laboratories International's stock price of $187.57 suggests that it is significantly undervalued.
Financial Strength
Investing in companies with robust financial strength is crucial to minimize the risk of capital loss. Key indicators such as the cash-to-debt ratio and interest coverage offer insights into a company's financial health. Charles River Laboratories International's cash-to-debt ratio stands at 0.05, which is lower than 94.69% of its peers in the Medical Diagnostics & Research industry. The company's financial strength is rated 5 out of 10 by GuruFocus, suggesting a fair financial condition.
Profitability and Growth
Consistent profitability over time is a hallmark of a less risky investment. Charles River Laboratories International has maintained profitability for the past decade, with an impressive operating margin of 15.37%, ranking above 77.19% of its industry counterparts. The company's profitability score is a perfect 10 out of 10, reflecting its strong financial performance. Additionally, Charles River Laboratories International's growth has been solid, with a 3-year average revenue growth rate surpassing 58.21% of the industry. Its 3-year average EBITDA growth rate of 19.3% also stands out, indicating a promising future.
ROIC vs WACC
Comparing a company's Return on Invested Capital (ROIC) to its Weighted Average Cost of Capital (WACC) is another way to assess profitability. ROIC indicates how effectively a company generates cash flow relative to its invested capital. When ROIC exceeds WACC, it suggests value creation for shareholders. Charles River Laboratories International's ROIC is 7.19%, while its WACC is 10.23%, implying potential for improvement in value generation.
Conclusion
Overall, Charles River Laboratories International (CRL, Financial) appears to be significantly undervalued. The company's financials are fair, and its profitability is robust, with growth outpacing a substantial portion of its industry. For a more in-depth look at Charles River Laboratories International's financials, check out their 30-Year Financials here.
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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.
