Analyst Note| Debbie S. Wang |
Narrow-moat Idexx’s barn-burning performance in the third quarter was stunning, and we’re raising our fair value estimate to $217 per share, after adjusting our assumptions for the full year, as well as incorporating more optimistic expectations for the rest of our explicit forecast period. Though a number of med-tech companies have commented on the rapidity of recovery off the nadir last spring during shelter-in-place orders, we think Idexx may take the cake on this dimension. Consolidated quarterly revenue rose 18% organically year over year, fueled by 21% organic growth in the companion animal segment (which accounts for over 85% of total revenue). This boom on the topline translated into quarterly earnings rising 34%. We suspect the outsized effect on the bottomline was driven by the 24% increase in reference lab services—a category that offers significant operating leverage as test volume rises. Nevertheless, shares remain massively overvalued, from our perspective.