{"id":24198,"date":"2023-06-18T07:00:12","date_gmt":"2023-06-18T11:00:12","guid":{"rendered":"https:\/\/ifintechworld.com\/news\/idexx-stock-one-of-the-best-but-too-expensive-to-risk-it-nasdaqidxx\/"},"modified":"2023-06-18T07:00:14","modified_gmt":"2023-06-18T11:00:14","slug":"idexx-stock-one-of-the-best-but-too-expensive-to-risk-it-nasdaqidxx","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=24198","title":{"rendered":"IDEXX Stock: One Of The Best But Too Expensive To Risk It (NASDAQ:IDXX)"},"content":{"rendered":"<div data-test-id=\"content-container\">\n<p><figure class=\"getty-figure\" data-type=\"getty-image\"><picture>  <\/picture><figcaption> <\/figcaption><\/figure>\n<\/p>\n<h2><span>Investment thesis<\/span><\/h2>\n<p>Our current investment thesis is:<\/p>\n<ul>\n<li> <span style=\"background-color: navy; color: white;\"><\/span>IDEXX growth and margins are highly attractive, with no real financial downsides.<\/li>\n<li>Commercially, <span style=\"background-color: navy; color: white;\"><\/span>IDEXX has transitioned toward higher growth\/margin areas while creating greater certainty by improving its recurring revenue.<\/li>\n<li class=\"paywall-full-content invisible\">The industry as a whole is attractive because it is defensive in nature on the downside while showing the characteristics of long-term growth.<\/li>\n<li class=\"paywall-full-content invisible\">The long issue is the share price, which prices in perfection. As much as we like the business, no company is perfect.<\/li>\n<\/ul>\n<h2 class=\"paywall-full-content invisible\">Company description<\/h2>\n<p class=\"paywall-full-content invisible\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX Laboratories (<span class=\"ticker-hover-wrapper\">NASDAQ:IDXX<\/span>) is a global company that develops, manufactures, and distributes products for veterinary, livestock, poultry, dairy, and water testing markets.<\/p>\n<p class=\"paywall-full-content invisible\">The company operates through three segments:<\/p>\n<ul class=\"paywall-full-content invisible\">\n<li>Companion Animal Group<\/li>\n<li>Water Quality Products, and Livestock<\/li>\n<li>Poultry and Dairy<\/li>\n<\/ul>\n<p class=\"paywall-full-content invisible\">Its products include point-of-care veterinary diagnostic products, veterinary reference laboratory diagnostic and consulting services, health<span class=\"paywall-full-content invisible no-summary-bullets\"> monitoring and laboratory animal diagnostic instruments, and services for the biomedical research community, among others.<\/span><\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Share price<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"sa-widget sa-ycharts\"><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/saupload_02ca69bc98f854556f3b047b75aa07bb.png\" alt=\"Chart\" width=\"635\" height=\"366\" class=\"sa-ycharts-img\" data-width=\"635\" data-height=\"366\" loading=\"lazy\"><figcaption>Data by YCharts<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX has been one of the top-performing stocks of the decade, returning over 900% to shareholders. The company has grown rapidly, building a leading market offering.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Financial analysis<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16802081875311782.png\" alt=\"Idexx Labs Pet\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX financials <span>(Tikr Terminal)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Presented above is <span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s financial performance for the last 10 years. The financial performance of the business has been fantastic, with little in the way of a downside.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Revenue<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Revenue has grown at a CAGR of 10%, with not a single period of growth below 5%. This level of consistency is fantastic for a business that is not a traditional growth business.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The key for <span style=\"background-color: navy; color: white;\"><\/span>IDEXX which underpins the revenue analysis we will conduct is the increasing use of technology in veterinary medicine. <span style=\"background-color: navy; color: white;\"><\/span>IDEXX has been at the forefront of this trend, with the development of its diagnostic tests and software solutions that are designed to provide accurate diagnosis at clinical visits. Similar to the rest of society, this technological trend will only continue.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">One of the obvious revenue drivers has been an increase in the number of household pets. The growth in pets has remained consistent, with an increasing number during the lockdown period, as consumers were spending a greater amount of time indoors. As pet ownership continues to rise, more pet owners are seeking high-quality healthcare services for their pets. The value for <span style=\"background-color: navy; color: white;\"><\/span>IDEXX is accretive over time, as the older the pet gets, the greater amount of support is required. This is illustrated in the second graph below, with revenue almost double for a geriatric pet compared to puppies\/kittens.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16870795785761058.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\">Pet data <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">For this reason, the increase as a result of Covid could provide a material bump to the business in the coming decade.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">In conjunction with this point, the change in demographics could be a tailwind for the business. As the current population ages, there is growing demand for healthcare services for older pets. <span style=\"background-color: navy; color: white;\"><\/span>IDEXX is well positioned to benefit from this trend (beyond the increased revenue potential as the above illustrates), as its diagnostic services become increasingly important.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Further, there is scope for this growth rate to improve as the younger generation has the largest proportion of dog ownership. A portion of this is likely situational, as the older generation is less likely to have the ability to support a pet, but nevertheless, we are seeing a bottom-heavy distribution which is the key.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817610004914556.png\" alt=\"Dogs\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"> <\/picture><figcaption>\n<p class=\"item-caption\">Dog ownership (Latest data) <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Another key revenue contributor is the use of clinical visits and veterinary services. Consumers are increasingly treating their pet&#8217;s health similarly to humans, becoming more aware of the importance of regular check-ups and preventative care for their pets. This comes with a greater understanding of animal anatomy, allowing for the improvement in the ability to provide health services. As the following graph shows, the growth rate of additional services has continually grown, with Covid-19 distorting the trend. We expect that this will continue to increase.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817613503559265.png\" alt=\"Pet clinic\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"> <\/picture><figcaption>\n<p class=\"item-caption\">Clinical visit growth <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX has supported this growth by expanding its global footprint, both in personnel and instrument installations. This is key as demand will only increase if the infrastructure is in place to support it. With this in mind, the investment in the expansion will always race ahead of the revenue growth rate.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">As the following illustrates, we have seen headcount more than double, with a significant investment in international operations.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16870798075052733.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\">Headcount in CAG <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Further, installed instruments have grown at an 17% CAGR, with no material slowdown in sight. Similar to headcount, the scope is largely due to the ability to expand overseas.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16870798871270523.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\">Instrument installs and runway <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Moreover, with growth understood, it is worth exploring the resilience of revenue. Spending on pets has shown little negative volatility, despite two serious economic events in the last 20 years. Consumers are seemingly able to find the finances to support spending regardless of conditions. <span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s organic growth supports this, with not a single period of negative growth.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817622696620052.png\" alt=\"Growth\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"> <\/picture><figcaption>\n<p class=\"item-caption\">CAG growth <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">One of the reasons for this is the relatively small portion of income that is allocated to pet spending. Regardless of their income segment, consumers are spending a similar amount on their pets, showing the ability to cost-effectively own a pet. For this reason, a decline in a consumer&#8217;s financial standing should not materially impact their ability to support pets.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16870800155629702.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\">Pet Spend <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Survey data supports this, with consumers willing to forego any discretionary spending in order to cover spending needs.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817622837469175.png\" alt=\"veterianrian\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"> <\/picture><figcaption>\n<p class=\"item-caption\">Household spending <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Therefore, the current economic conditions do not concern us in the slightest. <span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s financials reflect its commercial standing, that being incredible resilience.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">As if <span style=\"background-color: navy; color: white;\"><\/span>IDEXX is not already showing the hallmarks of a tech-adjacent business, the company has expanded its offering to include software services. This is one of the fastest-growing parts of the business and is contributing to margin improvement.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817649429876575.png\" alt=\"Software idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Vet software <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This has the potential to push revenue growth above the past trajectory, revolutionizing how the business makes money.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s revenue is of the highest quality. The company&#8217;s recurring revenue growth has exceeded all other segments, increasing its proportion of total revenue. This is highly regarded as it creates a degree of certainty over revenue, while also giving the business the ability to maintain and improve margins through periodic inflationary price increases.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><picture> <span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16870801008980336.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span> <\/picture><figcaption>\n<p class=\"item-caption\">Recurring revenue <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The ability to maintain growth long term is highly likely in our view due to the ability to replicate its success in the US overseas. The business has already seen its international growth exceed the US but will only accelerate as more geographies are added.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817603518236437.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Growth by region <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Further, although the diagnostics\/MS are the crown jewels, growth is strong across all its segments. The business is not reliant on any one revenue stream.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16817598121981916.png\" alt=\"Idexx\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Growth by segment <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Management currently estimates that it serves c.15% of its total addressable market, reflecting the growth potential available. Even within its core NA market, the business still has room to grow. The lion&#8217;s share of this should come <span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s way in our view given its market dominance.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Margins<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s margins reflect the quality of its revenue. The company currently has an EBITDA margin of 30% and a NIM of 20%. Not only is the level impressive but <span style=\"background-color: navy; color: white;\"><\/span>IDEXX has seen consistent improvement, with EBITDA-M up 6ppts. in 10 years.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The primary reason for this is a change in revenue mix toward Medical services and diagnostics, as well as software. Further, the nature of these revenue streams greatly allows positive pricing action, with recurring revenue driving much of the recent improvement.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Inflationary pressures and weakening demand has impacted the near-term performance, with margins slipping Y\/Y. Management is expecting this to continue in FY23, although margin expansion should occur from there as the revenue mix shift continues.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Q1 results<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-1684011460897666.png\" alt=\"IDEXX PET\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Q1 <span>(<span style=\"background-color: navy; color: white;\"><\/span><\/span>IDEXX<span>)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX continues to flex its resilience, reporting organic growth of 10%, with CAG generating 12%. Management note its install base growth continues to be strong, allowing revenue to expand as it has despite economic weakness.<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Balance sheet<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX&#8217;s balance sheet is fairly clean, reflected in its fantastic efficiency metrics.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The c.1x decline in inventory turnover is likely a reflection of slowing conditions but should not be a concern for now, as the ratio remains at a good level. This should be monitored quarterly as Management operationally adapts to changing conditions.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Management&#8217;s investment in future growth is reflected in its capex investment, which has grown at a CAGR of 10%. When considered alongside P&amp;L costs, the total spending is c.18% of revenue.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This has all been achieved with minimal use of debt, with the company&#8217;s current ND\/EBITDA ratio a mild 1.3x. This leaves scope for expansion if required.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Management&#8217;s distribution channel of choice is buybacks, with payments rapidly increasing in the last 2 years. This will likely fall in the coming years as much of the company&#8217;s excess cash has been expended.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"sa-widget sa-ycharts\"><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/saupload_13d4ede61e61fd0e1c6135063b1a4097.png\" alt=\"Chart\" width=\"635\" height=\"366\" class=\"sa-ycharts-img\" data-width=\"635\" data-height=\"366\" loading=\"lazy\"><figcaption>Data by YCharts<\/figcaption><\/figure>\n<\/p>\n<h4 class=\"paywall-full-content invisible no-summary-bullets\">Outlook<\/h4>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16802082074532616.png\" alt=\"Wall Street forecast\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\">Wall St. outlook <span>(Tikr Terminal)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Presented above is Wall Street&#8217;s outlook for the coming 5 years.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Revenue growth is expected to be slightly lower than historically achieved but still at a strong level of 9%. This looks like a conservative view from analysts but looks reasonable. Our view is that the commercial profile suggests an amount closer to 15% is possible.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Further, margin improvement is also expected, with its EBITDA margin improving to 32.5%. We concur with this view as a greater proportion of cloud and diagnostics services are provided.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Valuation<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\">\n<figure class=\"regular-img-figure a-c\" contenteditable=\"false\"><span><img decoding=\"async\" src=\"https:\/\/ifintechworld.com\/wp-content\/uploads\/2023\/06\/55358919-16869537862291021.png\" alt=\"SA\" contenteditable=\"true\" data-gramm=\"false\" wt-ignore-input=\"true\" loading=\"lazy\"><\/span><figcaption>\n<p class=\"item-caption\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX valuation <span>(Seeking Alpha)<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Readers likely expect <span style=\"background-color: navy; color: white;\"><\/span>IDEXX to be trading at a premium but the degree to which is quite staggering. The business is valued in line with growth businesses, boasting an EBITDA multiple of 35-39x.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">This is a sizeable level which makes investing in the business difficult. If growth was to slow, not that we expect it to, a rapid multiple contraction will be required as investors rerate the future cash flows. For this reason, the risk of investing at this price is extremely high.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">Our view is highly positive and we expect further good things to come. Based on this we believe the business is trading around its fair value, potentially with some upside. We see the company&#8217;s fair value at its 2020 multiple plus a slight premium to reflect the revenue mix change in the last 2 years. The reason for this is that the valuation exploded post-lockdown and muddies the fundamentals. Regardless, we do not see enough upside to justify the risk.<\/p>\n<h2 class=\"paywall-full-content invisible no-summary-bullets\">Final thoughts<\/h2>\n<p class=\"paywall-full-content invisible no-summary-bullets\"><span style=\"background-color: navy; color: white;\"><\/span>IDEXX is a fantastic business with a 20-year track record of growth. Rarely is a business this good without a problem of some sort. The company is highly defensive, growth and margins are great, the outlook is positive, and the balance sheet is strong. The key risk with <span style=\"background-color: navy; color: white;\"><\/span>IDEXX is the same for any company of its grandiose nature, execution. If growth slows, if Management missteps, markets will react aggressively due to a perfect future priced in.<\/p>\n<p class=\"paywall-full-content invisible no-summary-bullets\">The market has taken all the gains to be made, at least based on the current iteration of the business. Investors who currently own the stock are very lucky but for those considering a new position, any upside is lacking we feel.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/seekingalpha.com\/article\/4612179-idexx-stock-one-of-the-best-but-too-expensive-to-risk-it?source=feed_all_articles\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Investment thesis Our current investment thesis is: IDEXX growth and margins are highly attractive, with no real financial downsides. Commercially, IDEXX has transitioned toward higher growth\/margin areas while creating greater certainty by improving its recurring revenue. The industry as a whole is attractive because it is defensive in nature on the downside while showing the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":24199,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"gallery","meta":{"footnotes":""},"categories":[236],"tags":[83],"class_list":["post-24198","post","type-post","status-publish","format-gallery","has-post-thumbnail","hentry","category-news","tag-featured","post_format-post-format-gallery"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>IDEXX Stock: One Of The Best But Too Expensive To Risk It (NASDAQ:IDXX) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Investment thesis Our current investment thesis is: IDEXX growth and margins are highly attractive, with no real financial downsides. 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