Investors who’ve forgotten what the world was like before the long, slow melt-up might be nervous around charts like Charles River Laboratories Intl. Inc (NYSE:CRL), especially after management pushed the next earnings call back an extra day.
I get it. This is a name that has run over 50% year-to-date — better than 88% of stocks on the market and far ahead of most of its peers in the healthcare sector.
But the fundamentals are telling me that CRL has more room to run. The company has a commanding and extremely secure position within the pharmaceutical industry, so it’s going to take a drastic decline in drug research to cut into Charles River’s share of the discovery budget.
Remember, this isn’t some upstart lab company, but a linchpin of the global pharma ecosystem, working with all 100 of the world’s top drug makers and contributing to 70% of the programs that made it past the FDA last year.
Market penetration like that doesn’t go away because a partner decides to cut back on innovation. If anything, as Big Pharma gets hungrier for new drugs at a reasonable cost, bigger contracts get pushed to CRL scientists.
The challenge here, of course, is that while revenue is relatively reliable, significant growth is a factor of management’s ability to deepen existing relationships. The greater a percent of the development process that Charles River can take on, the more money it makes from each of those top 100 customers.