Idexx Laboratories Is a Great High-Margin Growth Play

The pandemic has greatly improved the prospects of the pet-care industry recently. Animal adoptions have skyrocketed as we all seek a little more companionship at our home offices. Accordingly, those who invested in Idexx Laboratories (NASDAQ:IDXX) and IDEXX stock have been well-rewarded over the past year.

a puppy and a kitten sniggling together. represents pet stocks

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Indeed, that IDEXX stock has soared about 130% over the past year is indicative of capital inflows into this sector. Investors are looking for high-margin growth, and Idexx provides this in spades. Here’s why I think the name could be one of the best mid-cap growth plays for investors seeking post-pandemic gains.

Adopting a Pet Is a Long-Term Commitment

The aforementioned surge in pet adoptions we’ve seen take place recently isn’t just bullish for Idexx over the near-term. Certainly, the next few quarters are shaping up nicely for the company. However, investors need to consider the medium- to-long-term impact of the recent pet-adoption jump. After all, pet ownership often lasts a decade or (hopefully) more.

Idexx provides a range of pet diagnostics tools and services for veterinarians and households. The company’s diagnostic tools and services enable companion animals to be quickly tested for a range of common illnesses. Idexx’s business is highly profitable, and it has grown substantially in recent years.

Impressively, in the fourth quarter, Idexx generated year-over-year organic revenue growth of 17%. The company has industry-leading products and services. As a result, Idexx currently has a comfortable market share lead over the second-ranked competitor in this sector, Zoetis (NYSE:ZTS).

I think this sector is poised for decades of growth. And Idexx is well-positioned to continue on its impressive growth path due to its current market positioning.

IDEXX Stock Is a Perfect Fit for Long-Term Fundamental Investors

Finding great growth companies at a reasonable price is difficult to do today. By most metrics, the market is overheated, and valuations have reached nosebleed levels in most sectors.

Companies that exhibit high-quality growth at a reasonable price are becoming more difficult to find. However, I think IDEXX stock fits the bill nicely for such investors.

This stock trades at roughly 76 times its trailing earnings. On a trailing price-sales basis, it looks a bit more expensive at 16 times its 2020 sales.

However, after looking at the stock chart of this growth play, long-term investors start salivating. And based on Idexx’s financials, this stock appears to be even more attractive.

Investors shouldn’t buy a stock based on a company’s historical track record alone. That’s just one factor to consider. However, Idexx’s management team appears to know what it’s doing. Indeed, the company is firing on all cylinders, providing the kind of profitable growth that’s become very elusive these days.

Financials Tell a Nice Story

The rule of thumb many investors have with respect to growth stocks is to own companies that can expand more than 15% per year over the long-term. Such growth lays the groundwork for stocks to double every five years.

In the case of Idexx, growth is not in short supply. Last quarter, the company’s revenue climbed 19% YOY. Additionally, a majority of this growth was generated not through acquisitions, but with the company’s existing businesses.

The best thing for long-term investors is that Idexx’s bottom line. is also increasing, as the company’s earnings per share jumped 37% in 2020. Many high-flying tech stocks are having trouble hitting that mark right now.


I think the market is pricing in the right amount of optimism toward this stock right now. There are turnaround plays coming out of this pandemic that can climb a tremendous amount. However, I view Idexx as less of a turnaround play and more of a long-term bet on the growth of a company with an impressive historical track record.

I think the fundamentals of the pet-care sector  are only likely to continue to improve over time. Consequently, those who haven’t looked at this company yet should do so. I think this is a stock that all investors should have on their watch lists right now.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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