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IDEXX (IDXX) Poised on Strong Fundamentals, Innovations

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On Mar 14, we issued an updated research report on IDEXX Laboratories, Inc. (IDXX - Free Report) . It is a developer, manufacturer and distributer of products and services, primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets.

IDEXX significantly outperformed the Zacks categorized Medical - Instruments industry with respect to share price movement over the past three months primarily backed by its latest addition to the coveted S&P 500 index.

The company’s better-than-expected fourth-quarter 2016 results further pushed up its share price. IDEXX has gained 26.61% over the past three months compared with 7.15% of the broader industry. The raised EPS (earnings per share) guidance for 2017 indicates a bullish trend going forward. Further, the company’s trend of consistent share buybacks reflects its strong free cash flow reserve.

IDEXX continues to demonstrate solid growth globally with strong international expansion. For full-year 2016, the company’s overall international revenues were 39% of its total revenue, reflecting organic gains of 12%. International instrument placement performance continues to be very strong including initial instruments placements of SediVue in the U.K. and Australia.

Management believes that an unprecedented wave of innovations, which IDEXX already boasts and plans to bring to the market on a larger scale, will immensely benefit the company. These innovations include the recently launched Catalyst One, SDMA and SediVue. The company’s strong revenue growth outlook is supported by expectations for 10.5–11.5% organic growth in CAG.

However, on the flip side, IDEXX’s valuation looks a bit stretched at this moment in terms of price-to-earnings ratio (P/E - F12M) when compared with its own industry. The stock currently trades at a P/E ratio of 49.4 compared with 28.14 for the broader industry. In fact, the current P/E is near the stock’s high level over the last three months. Even when compared to the market at large, the stock looks overvalued, as the P/E for the S&P 500 is at 17.96.

Zacks Rank & Key Picks

IDEXX currently has a Zacks Rank #2 (Buy). Other top-ranked stocks in the medical product sector include Inogen, Inc. (INGN - Free Report) , Bovie Medical Corporation and Cardiovascular Systems, Inc. . Inogen sports a Zacks Rank #1 (Strong Buy) while Bovie Medical and Cardiovascular Systems carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Inogen gained 82.9% in the last one year compared with the S&P 500’s gain of 17.7%. The company has a stellar four-quarter average earnings surprise of over 49.08%.

Bovie Medical surged 51.4% in the last one year compared with the S&P 500. It has a four-quarter average earnings surprise of 28.7%.

Cardiovascular Systems gained over 100% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared with the industry average of 15.2%.

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