IDEXX Laboratories, Inc. (IDXX) develops, manufactures and distributes products and provides services for the companion animal veterinary, livestock and poultry, dairy and water testing markets worldwide. The company also sells a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Its products and services include point-of-care veterinary diagnostic products that comprise instruments, consumables and rapid assay test kits.

Zomedica Corporation (ZOM) is a development stage veterinary diagnostics and pharmaceutical company that  focuses on the discovery, development, and commercialization of drugs, devices, and diagnostics for the health and wellness of companion animals.

A heightened interest in adopting pets amid the pandemic drove the pet industry to  all-time high sales of $103.60 billion in 2020, up 6.7% year-over-year, according to the American Pet Products Association. Consequently, animal health check-ups have led to an increase in the sale of pet medications and diagnostic devices over the past year, along with a rise in pet food and supplies. Furthermore, companies in this space are making innovative pet-friendly products and efficient diagnostic products to capitalize on growing demand.

While IDXX lost 4.9% over the past three months, ZOM surged 63.1%. In terms of their past year’s performance, ZOM is a clear winner with 274.5% gains versus IDXX’s 77.4% returns. But, which of these stocks is a better pick now? Let’s find out.

Latest Movements

In January, IDXX announced a landmark initiative with the Tuskegee University College of Veterinary Medicine (TUCVM). It  will contribute $3.6 million over six years to support  diversity, equity, and inclusion in veterinary medicine. In response to tremendous growth in the diversity of the pet-owning population over the past 10 years, this initiative should help to ensure the highest standard of care for all pets in their communities.

In an announcement on April 15, 2021, ZOM expanded its direct sales organization for ZOM’s TRUFORMA, a diagnostic device that delivers T4 and TSH hormone concentration count in pets’ bloodstream, while phasing out its distributor-based sales efforts. The company believes that some changes at its current distributor have  impacted TRUFORMA’s market reach and hopes this direct sales initiative will  increase its sales at a slow pace and avoid disruption to its customers.

Recent Financial Results

IDXX’s total revenues for its  fiscal year 2021 first quarter, ended March 31, 2021, increased 24.2% year-over-year to $777.71 million. Its net revenue from its  Companion Animal Group (CAG) segment increased 25.5% year-over-year to $692.77 million. The company’s gross profit came in at $470.78 million, up 30.9% from the prior-year period. Its income from operations is reported to be $247.62 million for the quarter, which represents a 71.6% improvement year-over-year. While its net income increased 82.7% year-over-year to $204.26 million, its EPS increased 82.2% year-over-year to $2.35.

For its fiscal year 2021 first quarter, ended March 31, 2021, ZOM’s net revenue is reported at $14,124 and its gross profit at $8,466. However, the company’s loss from operations has increased 65.9% year-over-year to $3.87 million. Its net loss came in at $4.04 million for the quarter, which represents a 64.7% rise year-over-year. Its loss per share increased 100% year-over-year to $0.04.

Past and Expected Financial Performance

IDXX’s EBITDA and EPS grew at CAGRs of 34.2% and 55.1% respectively, over the past year. The company’s total assets have increased at a 16.6% rate over the past three years.

Analysts expect IDXX’s revenue to increase 24.7% year-over-year for its  fiscal year 2021 second quarter (ending June 30, 2021), 14.3% in the current year, and 9.7% in  2022. Its EPS is expected to increase 18.2% year-over-year for the second quarter, 20.9% for the current year, and 11.3% in  2022. IDXX’s EPS is expected to grow at a 16.7% rate  per annum over the next five years.

In comparison, ZOM’s EBITDA grew at a 78.6% CAGR and its EPS declined at a 3.2% CAGR over the past year.

Analysts expect ZOM’s revenue to increase 243.3% in  2022. However, its EPS is expected to remain negative in the current year.

Profitability

IDXX’s trailing-12-month revenue is 202.55k times ZOM’s. IDXX is also more profitable, with a 31.3% EBITDA Margin versus ZOM’s negative value.

Also, IDXX’s ROE and ROA values of 166.3% and 23.7%, respectively, compare with ZOM’s negative values.

Valuation

In terms of forward trailing-12-month price/sales, ZOM is currently trading at 32,580x, 2076.8% higher than IDXX, which is currently trading at 15.68x. Also, IDXX’s 15.85x trailing-12-month EV/sales  is significantly lower than ZOM’s 36,733.14x.

Thus, IDXX looks more affordable here.

POWR Ratings

While ZOM has an overall F grade, which translates to Strong Sell in our proprietary POWR Ratings system, IDXX has an overall B grade, which equates to Buy. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.

IDXX has an A grade for Quality, which is consistent with its significantly higher-than-industry profitability ratios. However, ZOM has a D grade for Quality, which reflects its negative net income margin and return on total capital.

In terms of Sentiment, IDXX has been graded a B, which is in sync with the company’s revenues and earnings growth potential. In comparison, ZOM’s Sentiment Grade of C reflects relatively weak EPS and revenue growth expectations.

Out of 183 stocks in the Medical – Devices & Equipment industry, IDXX is ranked #14. ZOM is ranked #223 of 228 stocks in the F-rated Medical – Pharmaceuticals industry.

Beyond what we’ve stated above, our POWR Ratings system has also rated both IDXX and ZOM for Momentum, Stability, and Value. Get all ZOM ratings here. Also, click here to see the additional POWR Ratings for IDXX.

The Winner

Both IDXX and ZOM are well-positioned to capitalize on the industry tailwinds. However, IDXX appears to be a better buy based on its impressive financials and higher profitability.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Medical – Devices & Equipment industry, and here for those in the Medical – Pharmaceuticals industry.

Click here to checkout our Healthcare Sector Report for 2021

IDXX shares were unchanged in after-hours trading Thursday. Year-to-date, IDXX has gained 7.88%, versus a 11.44% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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