Today we're going to take a look at the well-established IDEXX Laboratories, Inc. (NASDAQ:IDXX). The company's stock received a lot of attention from a substantial price movement on the NASDAQGS over the last few months, increasing to US$557 at one point, and dropping to the lows of US$451. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether IDEXX Laboratories' current trading price of US$451 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at IDEXX Laboratories’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What Is IDEXX Laboratories Worth?
IDEXX Laboratories is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that IDEXX Laboratories’s ratio of 47.27x is above its peer average of 34.78x, which suggests the stock is trading at a higher price compared to the Medical Equipment industry. But, is there another opportunity to buy low in the future? Since IDEXX Laboratories’s share price is quite volatile, this could mean it can sink lower (or rise even further) in the future, giving us another chance to invest. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of IDEXX Laboratories look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. IDEXX Laboratories' earnings over the next few years are expected to increase by 31%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.
What This Means For You
Are you a shareholder? It seems like the market has well and truly priced in IDXX’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe IDXX should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on IDXX for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for IDXX, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing IDEXX Laboratories at this point in time. You'd be interested to know, that we found 2 warning signs for IDEXX Laboratories and you'll want to know about these.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.