Company Reports

We initiate coverage of Bio-Rad with a wide moat rating and $430 fair value estimate. We think the company is an attractive long-term investment with significant margin expansion opportunities in its consolidated businesses. Although the company’s profit margins have historically lagged peers, we think the market does not sufficiently appreciate Bio-Rad's progress and momentum in improving its cost structure.

Bio-Rad develops products and solutions for the life sciences research and clinical diagnostic markets and enjoys niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or dPCR, molecular testing. Bio-Rad’s business relies on the razor-and-blade model typically seen in the diagnostic market, and consumable reagents account for about 70% of total sales, with these reagents often sold at a higher margin than their associated equipment and instruments.

We are dropping coverage of Bio-Rad. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

While Bio-Rad’s second-quarter sales decline may seem disappointing, the story of the quarter was like the first quarter in that growth declines were not as bad as feared, and the company maintained margins in the face of inflation headwinds. Our $524 fair value estimate and narrow-moat ratings are unchanged, although we have slightly reduced our top-line forecasts for the year to account for foreign-exchange effects.

Narrow-moat Bio-Rad faced some headwinds in the first quarter from lower COVID-19 sales and supply chain challenges, though growth declines were not as bad as feared and margin held up well. Our $524 fair value estimate is unchanged.

We are raising our fair value estimate of Bio-Rad to $524 from $455 after accounting for higher flow-through income from Sartorius (which accounts for 40% of Bio-Rad's value) and our updated view that high-single-digit top-line growth is likely over the next five years. Management has provided new long-term guidance that significantly exceeds previous targets, and we believe these new goalposts are achievable considering Bio-Rad's exposure to high-growth life sciences and the long-term tailwinds from pandemic-related installed base growth.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for about 70% of total sales, with these reagents often sold at a higher margin than their associated equipment and instruments.

Narrow-moat Bio-Rad faced significant headwinds in the fourth quarter from lower COVID-19-related sales, which led to a year-over-year 780-basis-point decline in operating margin. That development is offset in our model by a higher valuation contribution from Sartorius and our expectation that the U.S. corporate tax rate will remain at 21%. Our $455 fair value estimate is unchanged.

Bio-Rad saw a strong quarter across the board in the third quarter, with currency neutral sales growth of 13.8% and EPS growth of 24%, excluding income and taxes from Sartorius. We are maintaining our $455 fair value estimate and our narrow moat and high uncertainty ratings. We continue to believe the market is overestimating Bio-Rad’s postpandemic growth prospects.

Narrow-Moat Bio-Rad reported strong second-quarter results, with currency-neutral sales growth of 27.5% and non-GAAP diluted EPS of $3.54 compared with EPS of $1.61 in second-quarter 2020. After adjusting our model for the strong near-term results and greater flow-through equity investment income from Sartorius, we are increasing our fair value estimate to $455 from $425. Our valuation increase is moderated by incorporating a weighted average U.S. tax rate of 26%.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for about 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for approximately 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.

Narrow-moat Bio-Rad reported very good results to start the year, led by robust growth in life sciences, continued margin improvement (excluding one-time effects), and, once again, material gains related to the firm’s Sartorius investment. We are leaving our fair estimate of $400 unchanged for now, though we may moderately increase our valuation after fully digesting results into our full-year projections.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for approximately 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for approximately 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.

Narrow-moat Bio-Rad beat our expectations once again in the fourth quarter, driven by growth in life sciences, an improved margin and further gains related to the Sartorius investment. While we may marginally increase our fair value estimate after incorporating full-year results for the firm and the impact of continued strong results from Sartorius, we continue to view shares as overvalued.

Narrow-moat Bio-Rad outperformed our expectations in the third quarter, with significant top-line growth in life sciences, greater operating leverage and gains related to the Sartorius investment all contributing to its outperformance. After incorporating the quarter’s results into our model and the impact of equity gains on the Sartorius stake, we are increasing our fair value estimate to $385 from $360.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for approximately 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.

We are launching coverage of diagnostic and life science supplier Bio-Rad with a $360 fair value estimate and narrow, stable moat ratings. We see shares as overvalued, and overexuberance for many diagnostic companies we cover is a trend that has not spared Bio-Rad, and shares are currently trading in 2-star range.

Bio-Rad develops products and solutions for the life science research and clinical diagnostic markets and has niche market leadership in diagnostic quality controls, antigens, and digital polymerase chain reaction, or PCR, molecular testing. Bio-Rad’s business relies on the razor/razor blade model typically seen in the diagnostic market, and consumable reagents account for approximately 65% of total sales, with these reagents generally sold at a higher margin than their associated equipment and instruments.