Charles River Laboratories International, Inc. (CRL) in Wilmington, Mass., is a non-clinical contract research organization that provides international drug discovery, non-clinical development, and safety testing services. The company and Valo Health, Inc. recently launched LogicaTM to provide their clients with highly advanceable leads and candidates. 

However, CRL is expected to be impacted by unfavorable movements in foreign currency exchange rates in the current year.

CRL’s 37.64% trailing-12-month gross profit margin is 32.2% lower than the 55.47% industry average. The stock has declined 11.8% over the past month and 48.4% over the past nine months to close yesterday’s trading session at $223.48. In addition, it is currently trading 51.4% below its 52-week high of $460.21, which it hit on Sept. 24, 2021. So, CRL’s near-term prospects look uncertain.

Here is what could influence CRL’s performance in the upcoming months:

Robust Financials

CRL’s total sales increased 10.8% year-over-year to $913.93 billion in the first quarter, which ended March 26, 2022. Its operating income grew 20.2% year-over-year to $148.78 million, while its net income came in at $95.23 million, representing a 48.9% year-over-year increase. Also, its EPS came in at $1.81, up 50.8% year-over-year.

Favorable Analyst Estimates

For its fiscal year 2022, analysts expect CRL’s EPS and revenue to grow 12.6% and 14.2% year-over-year to $11.62 and $4.04 billion, respectively. In addition, its EPS is expected to grow at 14.7% per annum over the next five years. Furthermore, Wall Street analysts expect the stock to hit $337.09 in the near term, indicating a potential 50.8% upside.

Stretched Valuation

In terms of forward P/B, CRL’s 3.70x is 37.3% higher than the 2.70x industry average. Likewise, its 13.70x forward EV/EBITDA is higher than the 12.93x industry average.

POWR Ratings Don’t Indicate Enough Upside

CRL has an overall C rating, which equates to a Neutral in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CRL has a C grade for Value, which is in sync with its higher-than-industry valuation ratios.

The stock has a C grade for Stability, which is consistent with its beta of 1.27.

CRL is ranked #19 out of 50 stocks in the D-rated Medical – Diagnostics/Research industry. Click here to access CRL’s ratings for Quality, Growth, Momentum, and Sentiment.

Click here to checkout our Healthcare Sector Report for 2022

Bottom Line

CRL is currently trading below its 50-day and 200-day moving averages of $263.44 and $346.67, respectively, indicating a downtrend. Furthermore, it could keep retreating due to concerns over currency headwinds in the near term. So, the stock looks overvalued at the current price level, and we think it could be wise to wait for a better entry point in the stock.

How Does Charles River Laboratories (CRL) Stack Up Against its Peers?

While CRL has an overall POWR Rating of C, one might want to consider investing in the following Medical – Diagnostics/Research stocks with an A (Strong Buy) rating: Global Cord Blood Corporation (CO), Qiagen N.V. (QGEN), and Agilent Technologies Inc. (A).

CRL shares were trading at $225.32 per share on Thursday afternoon, up $1.84 (+0.82%). Year-to-date, CRL has declined -40.20%, versus a -14.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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