IDEXX Laboratories (NASDAQ:IDXX) is a stock animal lovers have flocked to in recent months. Over the past year, IDXX stock has doubled. Today alone, this stock is up approximately 3% at the time of writing.
Let’s dive into what this company does, and why investors are so bullish on IDXX stock today.
IDXX Stock Provides a High-Margin, Profitable Business
The pet care industry is one many investors have flocked to recently. Pet ownership has surged as a result of the pandemic. It seems more of us want to spend our work-from-home and quarantine days with a feline or canine friend.
Importantly, IDEXX is a company that provides a range of products and services for both commercial and household use.
But what has IDXX on the move today? It turns out that the Motley Fool is bullish on the pet care company. In a new report from the premium service Stock Advisor, David Gardner told readers to buy Idexx Laboratories. With shares up about 3%, it appears they are listening.
As Gardner writes, the company sells “Companion Animal Diagnostics” tools to veterinarians. This has become a highly profitable business line for IDXX stockholders. Indeed, competitors such as Zomedica (NYSEMKT:ZOM) have entered this space in a bid to capture market share. Currently, IDEXX has an impressive market share lead over its No. 2 competitor Zoetis (NYSE:ZTS). This company is dominating this high-margin space. Accordingly, investors are expecting more in high-margin growth on the horizon.
Additionally, the company’s water, livestock, poultry and dairy business has been increasingly profitable of late. IDEXX provides a range of medicines for livestock. Indeed, the fact that IDEXX is at the forefront of agricultural science has positioned this stock well for outperformance.
From a profitability standpoint, IDXX stock has outperformed in recent quarters. The company’s earnings per share (EPS) has jumped more than 400% year-over-year.
Secular Catalysts Are Unstoppable
Yes, this stock is expensive. Shares of IDXX stock are trading at 17 times sales right now. Any stock with this level of growth built into its valuation ought to be monitored under a microscope.
However, investors who like IDXX stock right now are focused on the company’s secular growth catalysts. Some analysts believe the growth we’ve seen in 2020 in the pet category will likely continue for years to come. An investment in a pet is a multi-year long arrangement, after all.
IDEXX’s management team is targeting a 10% rate of revenue growth long term. Subsequently, earnings per share growth of 15%-20% per year is expected over the long-haul. With a total addressable market of around $33 billion in animal diagnostics, there’s lots of room to run.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.