Trading Idea: IDEXX Laboratories (IDXX-US)
IDEXX Laboratories is a $ 58.6 Bn market cap and develops products and services for the companion animal veterinary, livestock and poultry, dairy and water testing markets. The Company also sells a line of portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. Its segments include diagnostic and information technology-based products and services for the veterinary market, which the Company refers to as the Companion Animal Group; water quality products; diagnostic products and services for livestock and poultry health. Other operating segment combines products for the human point-of-care medical diagnostics market with its pharmaceutical product line and its out-licensing arrangements. Its products includes instruments, consumables and rapid assay test kits, among others.
IDEXX Laboratories is a member of the S&P 500 and a leader in pet healthcare innovation. It offers diagnostic and software that deliver solutions and insights to practicing veterinarians globally, enabling them to provide advanced medical care, improve staff efficiency, and build more efficient practices. IDEXX also provides diagnostic services for livestock and poultry, and its products are used in 175 countries. Over the past 5 years, IDEXX’s revenue has grown by a 45%. On top of that, operating margin has grown by 870 bps over the same timeframe, from 19.2% in 2016 to 28.8% expected this year. The margin growth has contributed to faster bottom-line growth than top-line, with EPS growing by 231% over the same 5 years.
Furthermore, being the industry leader comes with advantages, as the network effect leads to pricing power and efficient scale. We expect continued strength in the business due to strong domestic animal breeding and adoption over the past 15 months, linked to lockdowns effects.
Idexx is expected to post a $ 3.2 Bn revenue in 2021 (+18% yoy) coupled with a 28.8% EBIT margin. Revenues are expected to grow by double digits and margins to continue to ramp up in the following years. The company is deleveraged, but valuation is demanding at 70x 2022’s EPS.
Short term catalyst : Strong EPS momentum.
This signal looks consistent with the US Medtech sector in Major Bullish Trend.