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IDEXX LABORATORIES INC /DE 10-K Analysis & Summary – 2/21/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

IDEXX Laboratories, Inc.

Filing date:

02/21/2025

TLDR:

IDEXX Laboratories Inc. reported revenue growth driven by its Companion Animal Group (CAG) segment. The company demonstrates a solid financial position with continued growth potential, although macroeconomic headwinds and competitive pressures warrant careful monitoring.

ELI5:

IDEXX is a company that makes products to test the health of pets, farm animals, and water. They made more money this year than last year, mostly because their pet health business is doing well. They’re in good shape financially, but they need to watch out for economic problems and competition.

Accession #:

0000874716-25-000037

Published on

Analyst Summary

  • Revenue: $3.90 billion, a 6.5% increase compared to FY 2023.
  • Gross Profit: $2.38 billion, with a gross profit margin of 61.0%.
  • Operating Income: $1.13 billion, representing an operating margin of 29.0%.
  • Net Income: $887.9 million, or $10.67 per diluted share.
  • Gross Profit Margin increased from 59.8% to 61.0%, indicating improved cost management and pricing strategies.
  • Operating Margin slightly decreased from 30.0% to 29.0%, due to increased operating expenses.
  • CAG Revenue increased by 6.6%, driven by recurring diagnostic revenue.
  • Water Revenue increased by 10.1%, due to higher prices and volumes.
  • LPD Revenue increased slightly by 0.3%.
  • Current Ratio decreased from 1.57 to 1.31
  • Quick Ratio decreased from 1.17 to 0.95
  • Cash Ratio decreased from 0.48 to 0.27
  • Debt-to-Equity Ratio decreased from 0.82 to 0.54
  • Debt-to-Assets Ratio decreased from 0.29 to 0.26
  • Interest Coverage Ratio increased from 26.4 to 36.2
  • Inventory Turnover increased from 3.87 to 3.99
  • Days Sales Outstanding increased from 46.1 to 47.1
  • Days Payable Outstanding increased from 26.5 to 27.4
  • Asset Turnover increased from 1.13 to 1.19
  • Revenue Growth: 6.5%
  • Net Income Growth: 5.1%
  • EPS Growth: 6.1%

Opportunities and Risks

  • Competition: The companion animal healthcare industry is highly competitive, with increasing competition from existing players and new entrants.
  • Third-Party Suppliers: Dependence on sole or single-source suppliers for critical components and raw materials poses a supply chain risk.
  • Government Regulations: Compliance with various U.S. and foreign government regulations could limit or delay the ability to market and sell products.
  • Cybersecurity: Disruptions or significant cybersecurity breaches could adversely affect business operations.
  • Economic Conditions: Economic weakness may reduce demand for products and services.
  • Innovation: Continued product and service innovation, including the incorporation of AI, presents significant growth opportunities.
  • Global Expansion: Expanding international operations and strengthening sales and marketing activities outside the U.S.
  • Strategic Acquisitions: Identifying and integrating acquisitions that enhance existing businesses or create new ones.

Potential Implications

Stock Price

  • High valuation ratios suggest that the market has high expectations for IDEXX’s future growth.
  • P/E Ratio is 42.4, suggesting that the stock may be overvalued or that investors expect high growth in the future.
  • P/B Ratio is 23.2, suggesting that the stock may be overvalued.
  • P/S Ratio is 9.5, suggesting that the stock may be overvalued.
  • EV/EBITDA Ratio is 28.2, suggesting that the stock may be overvalued.

IDEXX Laboratories Inc. (IDXX) – 10-K Filing Analysis – FY 2024

Executive Summary

This report analyzes IDEXX Laboratories Inc.’s 10-K filing for the fiscal year ended December 31, 2024. IDEXX, a global leader in pet, people, and livestock health diagnostics, reported revenue growth driven by its Companion Animal Group (CAG) segment. The analysis focuses on key financial metrics, segment performance, risks, and opportunities. Overall, IDEXX demonstrates a solid financial position with continued growth potential, although macroeconomic headwinds and competitive pressures warrant careful monitoring. A ‘Hold’ recommendation is appropriate, pending further assessment of the evolving economic landscape and its impact on veterinary service demand.

Company Overview

IDEXX Laboratories, Inc. (IDXX) develops, manufactures, and distributes products and services for the companion animal veterinary, livestock and poultry, dairy, and water testing industries. The company operates primarily through three segments: Companion Animal Group (CAG), Water Quality Products, and Livestock, Poultry, and Dairy (LPD). Recent developments include the launch of the IDEXX inVue Dx Cellular Analyzer and upgrades to the IDEXX VetLab Station.

Detailed Analysis

Financial Statement Analysis

Key financial highlights for FY 2024 include:

  • Revenue: $3.90 billion, a 6.5% increase compared to FY 2023.
  • Gross Profit: $2.38 billion, with a gross profit margin of 61.0%.
  • Operating Income: $1.13 billion, representing an operating margin of 29.0%.
  • Net Income: $887.9 million, or $10.67 per diluted share.

Key Ratios:

  • Gross Profit Margin: Increased from 59.8% to 61.0%, indicating improved cost management and pricing strategies.
  • Operating Margin: Slightly decreased from 30.0% to 29.0%, due to increased operating expenses.

Revenue Growth by Segment:

  • CAG: Revenue increased by 6.6%, driven by recurring diagnostic revenue.
  • Water: Revenue increased by 10.1%, due to higher prices and volumes.
  • LPD: Revenue increased slightly by 0.3%.

Management’s Discussion and Analysis (MD&A) Insights

Management attributes revenue growth to global trends in companion animal healthcare and demand for diagnostic products and services. They acknowledge supply chain and logistics challenges and are actively managing these issues. The MD&A highlights the importance of innovation, customer focus, and strategic execution in maintaining competitiveness. Management also notes the potential impact of economic conditions on demand for their products and services.

Risk and Opportunity Assessment

Risks:

  • Competition: The companion animal healthcare industry is highly competitive, with increasing competition from existing players and new entrants.
  • Third-Party Suppliers: Dependence on sole or single-source suppliers for critical components and raw materials poses a supply chain risk.
  • Government Regulations: Compliance with various U.S. and foreign government regulations could limit or delay the ability to market and sell products.
  • Cybersecurity: Disruptions or significant cybersecurity breaches could adversely affect business operations.
  • Economic Conditions: Economic weakness may reduce demand for products and services.

Opportunities:

  • Innovation: Continued product and service innovation, including the incorporation of AI, presents significant growth opportunities.
  • Global Expansion: Expanding international operations and strengthening sales and marketing activities outside the U.S.
  • Strategic Acquisitions: Identifying and integrating acquisitions that enhance existing businesses or create new ones.

Red Flags and Uncommon Metrics

  • Litigation Expense: A $61.5 million expense related to an ongoing litigation matter significantly impacted general and administrative expenses.
  • Employee Turnover: Voluntary employee turnover rate of 8.5% indicates potential challenges in talent retention.

Conclusion and Actionable Insights

IDEXX Laboratories Inc. demonstrates a strong financial performance with solid revenue growth and healthy profit margins. The company’s focus on innovation and strategic execution positions it well for future growth. However, investors should be aware of the competitive landscape, supply chain risks, and potential economic headwinds. The litigation expense and employee turnover rate warrant further monitoring. A ‘Hold’ recommendation is appropriate, pending further assessment of the evolving economic landscape and its impact on veterinary service demand.

IDEXX Laboratories’ 2024 performance reflects solid growth driven by its Companion Animal Group (CAG) diagnostics segment. Revenue increased, and profitability remained strong, although operating income growth was modest. Strategic investments in R&D and acquisitions continue to shape the company’s future. The company maintains a healthy balance sheet, but cash flow from operations was slightly up.

Financial Ratio and Metric Analysis

Profitability

  • Gross Profit Margin

    • Ratio/Metric: $2,378,927 / $3,897,504 = 61.0%
    • Trend: Increase from 59.8% in 2023. Percentage Change: 2.0%
    • Industry: Generally, a gross profit margin above 50% is considered good. IDEXX’s margin is strong compared to the medical diagnostics industry average, which typically ranges from 50% to 60%.
  • Operating Profit Margin

    • Ratio/Metric: $1,128,337 / $3,897,504 = 29.0%
    • Trend: Decrease from 30.0% in 2023. Percentage Change: -3.3%
    • Industry: An operating profit margin of 15-20% is considered good. IDEXX’s margin is high compared to the medical diagnostics industry average, which typically ranges from 15% to 25%.
  • Net Profit Margin

    • Ratio/Metric: $887,867 / $3,897,504 = 22.8%
    • Trend: Increase from 23.1% in 2023. Percentage Change: -1.3%
    • Industry: A net profit margin of 10% or higher is considered good. IDEXX’s margin is strong compared to the medical diagnostics industry average, which typically ranges from 10% to 20%.
  • Return on Assets (ROA)

    • Ratio/Metric: $887,867 / $3,293,443 = 27.0%
    • Industry: A ROA of 5% or higher is generally considered good. IDEXX’s ROA is very high compared to the medical diagnostics industry average, which typically ranges from 5% to 10%.
  • Return on Equity (ROE)

    • Ratio/Metric: $887,867 / $1,595,313 = 55.6%
    • Industry: A ROE of 10% or higher is generally considered good. IDEXX’s ROE is very high compared to the medical diagnostics industry average, which typically ranges from 10% to 15%.
  • Earnings Per Share (EPS) – Basic and Diluted

    • Ratio/Metric: Basic EPS: $10.77, Diluted EPS: $10.67
    • Trend: Basic EPS increased from $10.17 in 2023. Percentage Change: 5.9%. Diluted EPS increased from $10.06 in 2023. Percentage Change: 6.1%.
    • Industry: EPS varies widely. IDEXX’s EPS is strong relative to its peers.

Liquidity

  • Current Ratio

    • Ratio/Metric: $1,399,897 / $1,067,916 = 1.31
    • Trend: Decrease from 1.57 in 2023. Percentage Change: -16.6%
    • Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. IDEXX’s current ratio is slightly below the ideal range.
  • Quick Ratio (Acid-Test Ratio)

    • Ratio/Metric: ($1,399,897 – $381,877) / $1,067,916 = 0.95
    • Trend: Decrease from 1.17 in 2023. Percentage Change: -18.8%
    • Industry: A quick ratio of 1.0 or higher is generally considered good. IDEXX’s quick ratio is slightly below the ideal range.
  • Cash Ratio

    • Ratio/Metric: $288,266 / $1,067,916 = 0.27
    • Trend: Decrease from 0.48 in 2023. Percentage Change: -43.8%
    • Industry: A cash ratio of 0.5 or higher is generally considered good. IDEXX’s cash ratio is low.

Solvency/Leverage

  • Debt-to-Equity Ratio

    • Ratio/Metric: ($449,786 + $167,787 + $250,000) / $1,595,313 = 0.54
    • Trend: Decrease from 0.82 in 2023. Percentage Change: -34.1%
    • Industry: A debt-to-equity ratio below 1.0 is generally considered good. IDEXX’s ratio is healthy.
  • Debt-to-Assets Ratio

    • Ratio/Metric: ($449,786 + $167,787 + $250,000) / $3,293,443 = 0.26
    • Trend: Decrease from 0.29 in 2023. Percentage Change: -10.3%
    • Industry: A debt-to-assets ratio below 0.5 is generally considered good. IDEXX’s ratio is healthy.
  • Interest Coverage Ratio (Times Interest Earned)

    • Ratio/Metric: $1,128,337 / $31,205 = 36.2
    • Trend: Increase from 26.4 in 2023. Percentage Change: 37.1%
    • Industry: An interest coverage ratio above 3.0 is generally considered good. IDEXX’s ratio is very strong.

Activity/Efficiency

  • Inventory Turnover

    • Ratio/Metric: $1,518,577 / (($381,877 + $380,282) / 2) = 3.99
    • Trend: Increase from 3.87 in 2023. Percentage Change: 3.1%
    • Industry: The inventory turnover ratio varies by industry. For medical diagnostics, a turnover between 3 and 6 is typical. IDEXX’s ratio is within a reasonable range.
  • Days Sales Outstanding (DSO)

    • Ratio/Metric: 47.1 days (as provided in the filing)
    • Trend: Increase from 46.1 days in 2023. Percentage Change: 2.2%
    • Industry: A DSO of less than 45 days is considered good. IDEXX’s DSO is slightly above the ideal range.
  • Days Payable Outstanding (DPO)

    • Ratio/Metric: ($114,211 / $1,518,577) * 365 = 27.4 days
    • Trend: Increase from 26.5 days in 2023. Percentage Change: 3.4%
    • Industry: DPO varies by industry. A DPO between 30 and 45 days is considered good. IDEXX’s DPO is below the ideal range.
  • Asset Turnover

    • Ratio/Metric: $3,897,504 / (($3,293,443 + $3,259,925) / 2) = 1.19
    • Trend: Increase from 1.13 in 2023. Percentage Change: 5.3%
    • Industry: An asset turnover ratio of 1.0 or higher is generally considered good. IDEXX’s ratio is reasonable.

Valuation

  • Price-to-Earnings Ratio (P/E)

    • Ratio/Metric: $452.77 / $10.67 = 42.4
    • Trend: N/A
    • Industry: The average P/E ratio for the S&P 500 is around 25. IDEXX’s P/E ratio is high, suggesting that the stock may be overvalued or that investors expect high growth in the future.
  • Price-to-Book Ratio (P/B)

    • Ratio/Metric: ($452.77 * 81,604,000) / $1,595,313,000 = 23.2
    • Trend: N/A
    • Industry: A P/B ratio between 1 and 3 is considered good. IDEXX’s P/B ratio is very high, suggesting that the stock may be overvalued.
  • Price-to-Sales Ratio (P/S)

    • Ratio/Metric: ($452.77 * 81,604,000) / $3,897,504,000 = 9.5
    • Trend: N/A
    • Industry: A P/S ratio below 2.0 is considered good. IDEXX’s P/S ratio is high, suggesting that the stock may be overvalued.
  • Enterprise Value to EBITDA (EV/EBITDA)

    • Ratio/Metric: EV = Market Cap + Total Debt – Cash = ($452.77 * 81,604,000) + $867,573,000 – $288,266,000 = $37,584,780,000. EV/EBITDA = $37,584,780,000 / $1,331,721,000 = 28.2
    • Trend: N/A
    • Industry: An EV/EBITDA ratio between 10 and 15 is considered good. IDEXX’s EV/EBITDA ratio is high, suggesting that the stock may be overvalued.

Growth Rates

  • Revenue Growth

    • Ratio/Metric: ($3,897,504 – $3,660,953) / $3,660,953 = 6.5%
    • Trend: N/A
    • Industry: The medical diagnostics industry is expected to grow at a rate of 5-7% per year. IDEXX’s revenue growth is in line with the industry average.
  • Net Income Growth

    • Ratio/Metric: ($887,867 – $845,042) / $845,042 = 5.1%
    • Trend: N/A
    • Industry: The medical diagnostics industry is expected to grow at a rate of 5-7% per year. IDEXX’s net income growth is in line with the industry average.
  • EPS Growth

    • Ratio/Metric: ($10.67 – $10.06) / $10.06 = 6.1%
    • Trend: N/A
    • Industry: The medical diagnostics industry is expected to grow at a rate of 5-7% per year. IDEXX’s EPS growth is in line with the industry average.

Other Relevant Metrics

  • Organic Revenue Growth

    • Analysis: The company highlights organic revenue growth as a key performance indicator. In 2024, organic revenue growth was 6.4%, slightly lower than the reported revenue growth of 6.5% due to currency effects and acquisitions. This metric is important because it reflects the underlying growth of the business, excluding external factors.
  • Adjusted EBITDA and Debt to Adjusted EBITDA Ratio

    • Analysis: The company uses Adjusted EBITDA as a measure of operational profitability. The gross debt to Adjusted EBITDA ratio was 0.65, and the net debt to Adjusted EBITDA ratio was 0.44. These ratios indicate that the company has a manageable level of debt relative to its earnings.

Commentary

IDEXX Laboratories delivered a solid financial performance in 2024, marked by revenue growth and strong profitability metrics. The company’s focus on its CAG segment continues to drive results, with recurring revenue streams providing stability. While liquidity ratios have decreased, solvency remains healthy, and the company’s debt levels are well-managed. High valuation ratios suggest that the market has high expectations for IDEXX’s future growth.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️