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Laboratory Corp. of America: A Pivotal Point in Virus Testing
03/24/2020 5:00 am EST
Testing is the first step in fighting COVID-19. Determining the scope of the problem helps medical professionals and policy makers prepare strategies. Testing is also the big opportunity for investors, explains Jon Markman, tech sector expert and editor of Pivotal Point.
Laboratory Corp of America Holdings (LH) bills itself as the world’s leading health care diagnostics company. The Burlington, N.C.-based company had $11.6 billion in sales during 2019, a paltry increase of 2% year-over-year. However, the best is yet to come.
Testing for COVID-19 in the United States is about to ramp up substantially. LabCorp will play a central role. Managers have built a strong relationship with the Trump White House. Now the company is rolling out aggressive new testing targets.
LabCorp facilities are expected to be capable of performing 20,000 tests per day by the end of the month. This represents a massive new, unanticipated sales bonanza that could last several quarters.
Shares trade at 11.8x forward earnings and only 1.5x sales at $136.22. Given the prospect of an uninterrupted new revenue stream, this seems extremely inexpensive.
Bill Gates is one of the most successful entrepreneurs in the past 50 years. He built his fortune by methodically preparing to tackle big problems. He’s at it again. And big problems mean big profits for those with a solution.
This is a wake-up call for investors. Look for weaknesses in companies like LabCorp that can provide solutions to today’s pressing issues. Those could be opportunities for long-term investors.
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