Idexx: Top Dog in Pet Diagnostics
07/13/2017 2:50 am EST
Approximately $62.8 billion a year is spent by Americans on pets, according to the American Pet Products Association, while the global market for animal health medicines is estimated to be worth from $24 billion to $30 billion, notes Tony Daltorio, editor of Growth Stock Advisor.
Idexx Laboratories (IDXX) is the recognized 'top dog' in the $3.3 billion global companion animal diagnostic and veterinary software market. The company gets 85% of its revenues from its companion animal group.
This segment provides point-of-care diagnostic equipment, diagnostic reference laboratories and consulting services, biological materials testing for veterinarians and veterinary practice software.
The company develops, manufactures and markets a large product line of easy-to-use proprietary in-clinic and mobile analyzers along with hand-held test kits.
All of these drive the recurring use of consumable products, consulting/diagnostic services and accompanying accessories and maintenance contracts while providing real-time, accurate point-of-care test results and office efficiencies for veterinary practices worldwide.
The result for Idexx is one that is to be envied — 72% of its companion animal group's diagnostics segment revenues are recurring.
The management at Idexx is smart, investing over five times more into research and development than its nearest competitor. The results of its R&D spending are clear, such as the first SDMA test for kidney function in dogs and cats and the first-of-its-kind SediVue Dx Urine Sediment Analyzer which uses artificial intelligence.
Its neural network has the ability to learn and train with every piece of new data received. That makes it smarter over time. The Neural Network 2.0 upgrade for the Analyzer leverages a knowledge base of 14 million images from 200,000 patients.
The company's goal for annual earnings per share growth is in the 15% to 20% range. I believe that target will be raised, as the company grows, to the 20% to 21% range.
Of course, all of these fantastic numbers have not escaped the notice of Wall Street. The stock has blown away the performance of the S&P 500 index. Year-to-date, the stock has gained 41.5% versus 9%.
Since the company listed in 1991, it has returned an incredible 17,455% to any shareholder patient enough to hold it all that time. So, in other words, it's a stock that is rarely “cheap”.
I have no problem buying the stock anywhere up to $175 a share, but would love to see it dip down to the $153 level. That was a prior peak and March and should serve as a likely stopping point on any steep downside move thanks to a decline in the overall market.