IDEXX Laboratories, Inc. (IDXX) is a global leader in veterinary diagnostics, practice software and water microbiology testing. The company operates through Companion Animal Group (CAG), Water Quality Products, Livestock, Poultry and Dairy, and Other segments.
IDXX’s strong revenues in CAG business in the third quarter and its efforts to support the needs of customers have powered its stock price upwards. After an impressive rally in the third quarter, IDXX is expected to end the year at higher levels due to an increase in new patient visits and in-house consultations as stringent social distancing rules are relaxed.
The company’s exceptional demand for CAG diagnostic products and services has allowed it to gain 74% year-to-date. This impressive performance combined with several other factors has helped IDXX earn a “Strong Buy” rating in our proprietary rating system. Here’s how our proprietary POWR Ratings system evaluates IDXX:
Trade Grade: A
IDXX is currently trading above its 50-day and 200-day moving averages of $421.74 and $337.18, respectively, indicating that the stock is in an uptrend. The stock gained 17.6% over the past three months, reflecting a solid short-term bullishness.
IDXX’s revenue increased 19.2% year-over-year to $721.80 million in the third quarter ended September 2020. The increase in revenue was primarily attributable to the significant growth in CAG Diagnostics. Gross profit rose 22.5% from the year-ago value to $422.61 million. Net income increased 34.3% year-over-year to $146.22 million, while EPS grew 35.7% from the prior-year quarter to $1.71 over this period.
Earlier this year, IDXX announced the expansion of its industry-leading imaging portfolio to include the ImageVue DR30 Digital Imaging System. This high-quality image and improved radiation safety will be accessible to a broader range of veterinarians at an affordable price.
Buy & Hold Grade: A
In terms of proximity to its 52-week high, which is a key factor that our Buy & Hold Grade takes into account, IDXX is pretty well positioned. The stock is currently trading just 5% below its 52-week high of $485, which it hit on November 9th.
The company’s net revenue grew at a CAGR of 10.8% over the past three years, while net income increased at a CAGR of 21.5% over this period. IDXX’s EPS increased at a CAGR of 23.1% over the past three years. This can be attributed to the company’s increasing utilization of diagnostics and its impressive global growth in CAG business.
Peer Grade: A
IDXX is currently ranked #4 out of 143 stocks in the Medical – Devices & Equipment industry. Other popular stocks in this industry are ResMed, Inc. (RMD), Varian Medical Systems, Inc. (VAR) and Alcon, Inc. (ALC)
ALC, VAR, and RMD gained 12.8%, 22.5%, and 35.3% year-to-date, respectively. This compares to IDXX’s 74% returns over this period.
Industry Rank: B
The Medical – Devices & Equipment industry is ranked #28 out of the 123 StockNews.com industries. The companies in this industry manufacture veterinary diagnostic products, medical equipment and supplies, medical instruments, dental equipment, and surgical appliances.
As medical manufacturers are being tasked with ramping up production to combat the pandemic, the demand for products in this industry has been sky high all year. Veterinary diagnostics have also seen increasing demand. Much of the increase in veterinary care is for wellness visits and pet vaccinations.
Overall POWR Rating: A (Strong Buy)
IDXX is rated “Strong Buy” due to its impressive financials, short- and long-term bullishness, solid price momentum, and underlying industry strength, as determined by the four components of our overall POWR Rating.
IDXX is well positioned to soar in the upcoming months despite gaining 74% year-to-date. As pet owners continue to spend more on medical care for their dogs and cats amid the uncertainties surrounding the pandemic, the demand for veterinary services is expected to surge in the near future. Hence, the company may witness further growth based on its favorable earnings and revenue outlook.
Analyst sentiment, which gives a good sense of a stock’s future price movement, is pretty impressive for IDXX. It has an average broker rating of 1.5, indicating favorable analyst sentiment. All 5 Wall Street analysts that rated the stock rated it a “Strong Buy.” The consensus EPS estimate of $6.07 for the current year indicates a 24.1% improvement year-over-year. The consensus revenue estimate of $2.67 billion for the current year indicates a 10.8% increase from the same period last year.
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IDXX shares were unchanged in after-hours trading Tuesday. Year-to-date, IDXX has gained 79.17%, versus a 15.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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