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Why Should You Add IDEXX (IDXX) Stock to Your Portfolio?

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IDEXX Laboratories, Inc. (IDXX - Free Report) has been gaining investor confidence on consistently positive results. The stock has surged 31% over a year, ahead of the S&P 500’s 25.8% gain and the broader industry’s 25.8% rally.

Moreover, the company has a market cap of $17.45 billion. Its five-year historical growth rate is also favorable at 15.9% compared with the industry’s 10.2%.

Dwelling on solid prospects, this Zacks Rank #2 (Buy) stock is an attractive bet for investors at the moment.

The company’s estimate revision trend for 2018 has been positive. In the last 60 days, seven analysts revised their estimates upward with no movement in the opposite direction. The consensus mark for earnings increased around 11.4% to $4.11 per share.

Per our Style Score, IDEXX Laboratories sports a Growth Score of A, reflective of the company’s strong fundamentals. Our research shows that stocks with an impressive Growth Style Score of A or B combined with a favorable Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.

 

In this regard, IDEXX Laboratories has a favorable Net Margin (Net Income/Sales) of 13.4% against the industry’s negative 12.9%. Also, the company’s sale to assets ratio of 1.19 compared with the industry’s 0.64 signifies it as a sturdy growth pick.

Let’s find out whether the recent positive momentum is a sustainable one.

The company is a leading manufacturer of products and services primarily for the companion animal veterinary, livestock and poultry. It exited the fourth quarter on a promising note. Stable year-over-year growth in organic revenues is also encouraging.

The stock’s stellar performance was driven by robust sales at the CAG (Companion Animal Group)business. In the fourth quarter of 2017, CAG organic revenues rose low double digits on the back of strong CAG Diagnostics recurring organic revenue growth and VetLab consumables organic revenue growth. Additionally, we are upbeat about the company’s expanding premium instrument base in the United States and the international markets including improved competitive instrument placements, increasing utilization and continued customer retention.

In this regard, we are also optimistic about gains from the commercial launch of Catalyst SDMA Test in North America in January 2018. With this breakthrough, the company’s point-of-care customers will be able to add SDMA as an essential element to the routine chemistry panel.

Continuing with a slew of developments, IDEXX Laboratories entered into a global agreement this January with the diagnostic company Applied BioCode. Per the agreement, IDEXX Laboratories will bring its Reference Laboratories customers on the digital multiplex platform built by Applied BioCode. Management aims at commercially launching this technology in 2019.

The companion animal market fundamentals remain consolidated on a tremendous global runway for growth. Management’s innovation-based, multi-modality global strategy accelerated recurring CAG Diagnostics revenue growth in the reported quarter. Moreover, substantial top-line growth in the quarter was driven by considerable contributions from other business segments. Furthermore, a raised guidance for 2018 earnings per share instills confidence in the stock.

We are also upbeat about the company witnessing double-digit organic revenue growth in the international business. This upside reflected consistent consumable revenue gains supported by a Catalyst instrument base and average testing utilization.

Additionally, the company has a secure cash balance, allowing it to carry out share repurchases.

Meanwhile, IDEXX Laboratories’ heavy reliance on third-party distributors raises a concern. Moreover, a tough competitive landscape in the domestic and overseas markets weighs on the company’s margin.

Other Key Picks

Some other top-ranked stocks in the broader medical sector are Bio-Rad Laboratories (BIO - Free Report) , athenahealth, Inc. and Varian Medical Systems, Inc. .

Bio-Rad Laboratories sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The company has a long-term expected earnings growth rate of 20%.

athenahealth is a Zacks #1 Ranked player. The company has a long-term expected earnings growth rate of 21.5%.

Varian Medical has a long-term expected earnings growth rate of 8%. The stock carries a Zacks Rank of 2.

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