We came across a bullish thesis on IDEXX Laboratories, Inc. (IDXX) on Substack by Douglas Ott. In this article, we will summarize the bulls’ thesis on IDXX. IDEXX Laboratories, Inc. (IDXX)’s share was trading at $435.69 as of Dec 6th. IDXX’s trailing and forward P/E were 42.06 and 38.46 respectively according to Yahoo Finance.
A veterinarian conducting a physical exam on a four-legged patient in a veterinary hospital, highlighting the company’s work in veterinary health.
IDEXX Laboratories (IDXX) is a global leader in veterinary diagnostics, software, and water microbiology testing. The company experienced significant growth during the COVID-19 pandemic, fueled by an increase in pet adoption and ownership, as more people sought companions during lockdowns. Prior to COVID, the U.S. pet population grew at a steady rate of 1% annually, but it surged by 6% in 2020 and 4% in 2021. However, the growth in the pet population has since slowed back to historical trends. In addition, the number of clinical visits by pets has shown a slight decline since 2022, which has impacted IDEXX’s performance. The company’s management attributes this downturn to two main factors: first, veterinary clinics are still struggling with staffing and capacity issues, leading to a reduction in the total hours worked, which has not yet returned to pre-pandemic levels; second, the economic strain of inflation has made pet owners more cautious with their spending, reducing visits and expenditures on veterinary services.
This combination of factors has led to a sharp decline in IDEXX’s valuation, with the company’s EV/EBITDA multiple falling from a peak of 65.9x in mid-2021 to levels seen during the initial stages of the pandemic. Despite these short-term challenges, IDEXX remains a dominant player in its field, benefiting from long-term growth drivers such as a steadily increasing pet population and the growing willingness of pet owners to spend on their pets’ health and well-being. While demand was somewhat pulled forward during the COVID era, and the company faces inflationary pressures, IDEXX is positioned well in the long term. For investors, the current market conditions, though challenging in the short term, may present an attractive opportunity. The company’s leadership in its sector, combined with the continued tailwinds from the growing pet market, suggests potential for recovery and growth once the headwinds subside.
IDEXX Laboratories, Inc. (IDXX) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held IDXX at the end of the third quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of IDXX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IDXX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.