Unveiling the Investment Potential of Laboratory Corp of America Holdings (LH): A Comprehensive ...
Laboratory Corp of America Holdings (NYSE:LH) has recently been in the spotlight, drawing interest from investors and financial analysts due to its robust financial stance. With shares currently priced at $206.58, Laboratory Corp of America Holdings has witnessed a decline of 0.73% over a period, marked against a three-month change of 13.67%. A thorough analysis, underlined by the GuruFocus Score Rating, suggests that Laboratory Corp of America Holdings is well-positioned for substantial growth in the near future.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
Here is a breakdown of Laboratory Corp of America Holdings' GF Score:
1. Financial strength rank: 7/10
2. Profitability rank: 9/10
3. Growth rank: 10/10
4. GF Value rank: 5/10
5. Momentum rank: 8/10
Each one of these components is ranked and the ranks also have positive correlation with the long term performances of stocks. The GF score is calculated using the five key aspects of analysis. Through backtesting, we know that each of these key aspects has a different impact on the stock price performance. Thus, they are weighted differently when calculating the total score. With a high growth rank and a solid profitability rank, GuruFocus assigned Laboratory Corp of America Holdings the GF Score of 94 out of 100, which signals the highest outperformance potential.
Understanding Laboratory Corp of America Holdings Business
Laboratory Corp of America Holdings, with a market cap of $18.3 billion, is one of the nation's two largest independent clinical laboratories, holding roughly 20% of the independent lab market. The company operates approximately 2,000 patient-service centers, offering a broad range of 5,000 clinical lab tests, ranging from routine blood and urine screens to complex oncology and genomic testing. With sales of $14.09 billion and an operating margin of 10.6%, the company has demonstrated a strong financial performance.
Financial Strength Breakdown
According to the Financial Strength rating, Laboratory Corp of America Holdings's robust balance sheet exhibits resilience against financial volatility, reflecting prudent management of capital structure. The Interest Coverage ratio for Laboratory Corp of America Holdings stands impressively at 7.62, underscoring its strong capability to cover its interest obligations. This robust financial position resonates with the wisdom of legendary investor Benjamin Graham, who favored companies with an interest coverage ratio of at least 5. With a favorable Debt-to-Revenue ratio of 0.44, Laboratory Corp of America Holdings's strategic handling of debt solidifies its financial health.
Profitability Rank Breakdown
The Profitability Rank shows Laboratory Corp of America Holdings's impressive standing among its peers in generating profit. Laboratory Corp of America Holdings Operating Margin has increased (18.07%) over the past five years, as shown by the following data: 2018: 12.12; 2019: 11.99; 2020: 21.09; 2021: 20.49; 2022: 14.31. Furthermore, the company's Gross Margin has seen a consistent rise over the past five years, as evidenced by the data: 2018: 28.03; 2019: 28.15; 2020: 35.43; 2021: 34.89; 2022: 29.48. This trend underscores the company's growing proficiency in transforming revenue into profit. Laboratory Corp of America Holdings's strong Predictability Rank of 4.5 stars out of five underscores its consistent operational performance, providing investors with increased confidence.
Growth Rank Breakdown
Ranked highly in Growth, Laboratory Corp of America Holdings demonstrates a strong commitment to expanding its business. The company's 3-Year Revenue Growth Rate is 11.5%, which outperforms better than 53.43% of 204 companies in the Medical Diagnostics & Research industry. Moreover, Laboratory Corp of America Holdings has seen a robust increase in its earnings before interest, taxes, depreciation, and amortization (EBITDA) over the past few years. Specifically, the three-year growth rate stands at 10.3, and the rate over the past five years is 14.1. This trend accentuates the company's continued capability to drive growth.
Conclusion
Given the company's strong financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights Laboratory Corp of America Holdings's unparalleled position for potential outperformance. This analysis suggests that Laboratory Corp of America Holdings is a promising investment opportunity for value investors seeking robust returns. GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
