Company Spotlight: IDEXX Labs

 Profits From Pets

Nasdaq: IDXX
$60.50 (as of 11/30/07 )
P/E 28	PSR 3.5
ROE 24%	BETA n/a
Debt/Eq. 0.14
Our "Five Benchmarks" tutorial explains these numbers

• The Good:  Expanding market share globally.
• The Bad:  Valuation relatively high.
• The Beautiful:  Each new analyzing machine has lots of disposables for continuing revenues.

December 3, 2007 - If IDEXX Laboratories Inc. (IDXX-NASDAQ) had been on the scene, Old Yeller might have had a happy ending. Veterinarians use the company's VetTest analyzer for blood and urine chemistry and its SNAP and PetChek diagnostic test kits to detect heartworms, feline leukemia, and other diseases. The company also provides veterinary consulting services and practice management software. In addition, IDEXX makes immunoassay kits to detect livestock diseases and test systems for contaminants in water and antibiotics in milk. Its OPTI product line for humans includes electrolyte and blood gas analyzers.

IDEXX's stock has been on an upward track for the last 4 years.  If it hadn't had a correction in 2004, that track would have been for 8 years, starting in 2000 at a low of $7.30 (price adjusted for 2 for 1 split recently).  Stocks tend to move up like this when their earnings are improving consistently.  IDXX is no exception.

IDXX has a division called Companion Animal Group, and it's growing like a Great Dane puppy.  Last quarter, the unit delivered 82% of the revenue and 79% of the gross profits.  It saw sales grow over 22% from the same quarter last year.  The big product is the VetLab line of analyzers.  The machines need disposable materials to perform diagnostic tests.  Each installed machine represents continuing revenues.  Not only are sales for the disposables strong, but so are the machines themselves, the VetLab analyzers, suggesting 2008 and beyond should be healthy.

There's another machine vets like: VetLab Stations.  It's an informaton management system that manages data from all IDEXX's analyzers.  There are about 4600 installed around the world.  Any of these owners will most likely look at the IDEXX portfolio of offerings and choose the ones that are already compatible with the management system when they look to buy analyzers or other machines.

Some of the numbers:  Foreign sales account for about 1/3 of revenues.  Return on Equity is an attractive 24%.  Earnings and sales are projected to grow by 16% a year, on average, over the next 5 years.  There is a very small amount of long term debt, less than 2% of capital.  Market cap is almost $4 billion with 61.227 million shares outstanding.  Current assets are almost 50% greater than current liabilities with $59 million in cash.  There is no dividend.  Net profit margin is 11.3%.

Investors love this stock.  It carries a price to earnings (p/e) ratio of 28, well above the average for all stocks reporting earnings.  While it's off recent all-time highs by less than 10%, it's no bargain.  Furthermore, investors wanting to start a position in the stock may not see it take a breather unless there's a negative surprise.  This one just keeps going up and up.  At some point, it won't, but if the company delivers on the potential for this market, expect this stock to continue on its positive path.

- Company Web site: http://www.idexx.com/

- Ted Allrich