We recently published a list of the 12 Best Diagnostics Stocks to Invest In Right Now. In this article, we are going to take a look at where Charles River Laboratories International, Inc. (NYSE:CRL) stands against the other best diagnostics stocks to invest in right now.
Overview of the Clinical Diagnostics Market
According to a report by Mordor Intelligence, the clinical diagnostics market has a size of $88.79 billion as of 2025. It is expected to grow at a compound annual growth rate (CAGR) of 5.48% between 2025 and 2030, reaching $115.94 billion at the end of the forecast period. While North America is the largest market in the domain at present, Asia-Pacific takes the lead as the fastest growing.
As per Grand View Research, the growth in the global clinical diagnostics industry is attributed to the rising demand for lab automation and the development of specialized tests for disease management and early disease detection. In addition, the growing use of point-of-care diagnostics products has also driven a decentralization trend in the healthcare industry.
READ ALSO: 7 Most Undervalued Biotech Stocks To Invest In and 11 Best Pharma Stocks to Buy According to Hedge Funds.
AI in Diagnostics Healthcare: Is A New Trend Emerging?
One of the primary trends emerging in the sector is the growing use of artificial intelligence. AI-powered diagnostic tools are revolutionizing the interpretation of medical images with high accuracy, leading to increased adoption. These tools not only improve disease diagnostics but also allow medical professionals to develop more effective and personalized treatment plans, elevating the overall healthcare experience.
On February 24, GlobeNewswire reported that the US AI diagnostics market was worth around $655 million in 2024, as per estimates by Precedence Statistics. It is expected to grow at a CAGR of 20.7% between 2025 and 2034, reaching $4.29 billion by the end of the forecast period.
On February 4, Eric Lefkofsky, founder and CEO of Tempus AI, appeared on CNBC to talk about the impact of generative AI in diagnostics healthcare, among other things. He was of the view that generative AI and large language models aren’t more impactful in any other avenue as much as they are in healthcare. Diagnostics sit at the center of healthcare, as almost every other major decision a doctor makes is undertaken after ordering some kind of laboratory test. If we can make diagnostics more intelligent, it would be possible to route patients to the best possible and most optimal therapy.
Generative AI is thus allowing access to new tools that help structure and make sense of disparate information and use that information, whether it be physician progress notes, pathology reports, molecular data, CAT scans, MRIs, or others, to make sure that the patients are on the optimal therapy path. He further said that the promise of this technology is twofold: it is enormous in helping patients live better and longer lives while reducing the substantial waste in the US healthcare system. Generative AI is thus significantly impactful in healthcare diagnostics.
Our Methodology
We sifted through stock screeners, financial media reports, and ETFs to compile a list of 20 diagnostics and research stocks. We then selected the top 12 with the highest number of hedge fund holders, as of Q4 2024, and ranked them in ascending order. We sourced the hedge fund sentiment data from Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A laboratory scientist surrounded by drug-discovery equipment and resources.
Charles River Laboratories International, Inc. (NYSE:CRL)
Number of Hedge Fund Holders: 45
Charles River Laboratories International, Inc. (NYSE:CRL) offers essential services and products to biotechnology and pharmaceutical companies, academic institutions, and government agencies to support and augment their research, diagnostics, and drug development endeavors. It operates through the Research Models and Services (RMS), Discovery and Safety Assessment (DSA), and Manufacturing Solutions segments.
The company reported a 7.4% growth in its non-GAAP net income for fiscal Q4 2024, reaching $136.6 million. Diluted EPS on a non-GAAP basis was $2.66, an increase of 8.1%. These growth trends were attributed to higher operating income and favorable below-the-line items, including reductions in the tax rate, interest expense, and diluted shares outstanding.
Charles River Laboratories International, Inc. (NYSE:CRL) has launched several initiatives to safeguard operating margin and shareholder value, including restructuring initiatives expected to yield annualized savings of approximately $225 million in 2026. Of these, over $175 million will be realized in 2025. Upslope Capital Management was bullish on Charles River Laboratories International, Inc. (NYSE:CRL) in their Q4 2024 investor letter, reflecting that the company holds a leading market share position in a number of its businesses. It has worked on around 80% of all the drugs approved in the last five years, which further sheds light on its large-scale operations.
Here is what Upslope Capital Management said about the company in its Q4 2024 investor letter:
“Charles River Laboratories International, Inc. (NYSE:CRL) is a pharmaceutical services business, whose key offerings include drug discovery support and safety testing, research models, and outsourced manufacturing. The company holds leading market share positions in several of its business lines and has worked on ~80% of all drugs approved over the last five years. Customers are mostly biotech (40% of revenue) and pharma (30%) businesses – largely located in North America (70%) and Europe (25%).
Like plenty of other healthcare businesses that boomed during the COVID era, Charles River has had a challenging few years. Just recently – yesterday to be exact – the Company disappointed the Street with soft guidance for 2025. In Upslope’s view, CRL is a cyclical compounder going through a…cyclical downturn. Today, shares trade in-line with where they did five years ago – despite revenue and FCF/share that are 50% and 30% higher (while being in the midst of a cyclical downturn – i.e. real earnings power should be materially higher). While the company relies on volatile end markets, over the long run its own free cash flow tends to march higher, driven by advances in and rising demand for drug development. Upslope’s key thesis points include:…” (Click here to read the full text)
Overall, CRL ranks 11th on our list of the best diagnostics stocks to invest in right now. While we acknowledge the potential of CRL as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRL 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 is originally published at Insider Monkey.