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Is IDEXX Laboratories, Inc. (NASDAQGS:IDXX) too expensive at 53.62x EV/EBITDA?


IDEXX Laboratories, Inc. (NASDAQGS:IDXX) is currently trading at $441.23, at approximately 93.1% of its 52-week high of $485.00. With the stock price up 74.6% in the last year, investors are worried that the company is getting too expensive. So, is IDEXX Laboratories, Inc. overvalued? In this article, we’ll discuss IDEXX Laboratories, Inc.’s valuation using different valuation models.

Historical Valuation

One of the quickest ways to spot if a company is getting too expensive is to compare the current valuation to its historical one. We can use the price to sales ratio to cut the noise and avoid the volatility of the company’s earnings.

Considering IDEXX Laboratories, Inc.’s latest twelve months revenue/share of $30.38 and using the company’s 5-year average price to sales of 8.24x as a benchmark, we have a fair value of $250.32, which is -43.3% lower than the current price.

With no surprise, we can see that IDEXX Laboratories, Inc.’s price to sales of 14.8x is much higher than its 5-year average of 8.2x, indicating that the company is probably trading in overbought territory. We can easily visualize trends in the company’s fundamentals using the Finbox chart editor, as depicted below.

Source: Finbox Chart’s Engine

Absolute Valuation: IDEXX Laboratories, Inc. DCF Analysis

Using a company’s historical valuation as a benchmark could lead to misleading results if a change in its fundamentals justifies the current valuation. So it’s always preferable to take into account the latest financial forecast and analyze the company with an absolute valuation model.

So, let’s analyze IDEXX Laboratories, Inc. with a 5Y DCF analysis (EBITDA exit method). Using the latest 5Y revenue forecast CAGR of 6.6%, an average EBITDA margin forecast of 29.1%, a discount rate of 8.0%, and a terminal EBITDA multiple of 29.2x, we get a fair value of $263.2.

So, Is IDEXX Laboratories, Inc. Overvalued?

Relying only on one or two financial models to determine a company’s fair value is never a good idea. It’s always preferable to use different models before coming to hasty conclusions.

The Finbox Fair Value Estimate is an advanced financial modeling technology that uses eleven different models to estimate the fair value of a stock and lets you get a company’s fair value at your fingertips. All the models are based on the same data utilized by the biggest investment banks and money managers in the world.

According to the estimate, IDEXX Laboratories, Inc.’s fair value is $276.56, representing a -38.5% downside from the current price. Below are the fair value estimates for each model.

Source: Finbox Fair Value Estimates

Company’s Profile: IDEXX Laboratories, Inc.

IDEXX Laboratories, Inc., together with its subsidiaries, develops, manufactures, and distributes products and services primarily for the companion animal veterinary, livestock and poultry, dairy, and water testing markets worldwide. The company operates through Companion Animal Group; Water Quality Products; Livestock, Poultry and Dairy; and Other segments. It provides point-of-care veterinary diagnostic products, including instruments, consumables, and rapid assay test kits; veterinary reference laboratory diagnostic and consulting services; practice management and diagnostic imaging systems and services for veterinarians; and health monitoring, biological materials testing, and laboratory animal diagnostic instruments and services for biomedical research community. The company also offers diagnostic and health-monitoring products for livestock, poultry, and dairy; products that test water for various microbiological contaminants; and point-of-care electrolytes and blood gas analyzers that are used in the human point-of-care medical diagnostics market. It markets its products through marketing, customer service, sales, and technical service groups, as well as through independent distributors and other resellers. IDEXX Laboratories, Inc. was incorporated in 1983 and is headquartered in Westbrook, Maine

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