Unveiling Charles River Laboratories International's Value: Is It Really Priced Right? A ...
Charles River Laboratories International Inc (NYSE:CRL) has recently experienced a daily loss of 1.45%, and a 3-month loss of 4.41%. Despite these losses, the company's Earnings Per Share (EPS) (EPS) stand at 9.43. Is the stock significantly undervalued? This article offers a comprehensive valuation analysis to answer this question. Let's delve into the financial details of Charles River Laboratories International and assess its true market value.
A Snapshot of Charles River Laboratories International
Founded in 1947, Charles River Laboratories International is a leading provider of drug discovery and development services. The company's research model & services segment is a globally recognized provider of animal models for laboratory testing. The discovery & safety assessment segment covers services required for the early development process, including discovery services. The manufacturing support segment includes microbial solutions, offering in vitro (non-animal) testing products, biologics testing services, and avian vaccine services.
With a current stock price of $196.72, Charles River Laboratories International boasts a market cap of $10.10 billion. The following income breakdown provides a more detailed view of the company's financial performance.
Understanding GF Value
The GF Value is a unique measure of a stock's intrinsic value, calculated based on historical trading multiples, an adjustment factor from GuruFocus based on past returns and growth, and future business performance estimates. The GF Value Line provides an overview of the fair value at which the stock should ideally be traded.
According to GuruFocus' valuation method, Charles River Laboratories International (NYSE:CRL) is significantly undervalued. The GF Value estimates the stock's fair value based on historical multiples, an internal adjustment based on past business growth, and analyst estimates of future business performance. If the stock's share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the stock's share price is significantly below the GF Value Line, the stock may be undervalued and have high future returns.
As Charles River Laboratories International is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
Assessing Financial Strength
Before investing in a company, it's crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. Key indicators of financial strength include the cash-to-debt ratio and interest coverage. Charles River Laboratories International has a cash-to-debt ratio of 0.07, which ranks lower than 92.54% of 228 companies in the Medical Diagnostics & Research industry. The overall financial strength of Charles River Laboratories International is 5 out of 10, indicating fair financial strength.
Profitability and Growth
Consistent profitability over the long term reduces investment risk. Charles River Laboratories International has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $4.20 billion and an Earnings Per Share (EPS) of $9.43. Its operating margin is 15.5%, which ranks better than 77.29% of 229 companies in the Medical Diagnostics & Research industry. Overall, the profitability of Charles River Laboratories International is ranked 9 out of 10, indicating strong profitability.
Growth is a critical factor in a company's valuation. Companies that grow faster create more value for shareholders, especially if the growth is profitable. The average annual revenue growth of Charles River Laboratories International is 13.7%, which ranks better than 58.82% of 204 companies in the Medical Diagnostics & Research industry. The 3-year average EBITDA growth is 19.3%, which ranks better than 61.9% of 189 companies in the Medical Diagnostics & Research industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another way to determine its profitability. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Charles River Laboratories International's ROIC is 7.25, and its WACC is 9.58.
Conclusion
In summary, the stock of Charles River Laboratories International (NYSE:CRL) is believed to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 61.9% of 189 companies in the Medical Diagnostics & Research industry. To learn more about Charles River Laboratories International stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
