Analyst Note| Debbie Wang |
Idexx Labs saw solid results in the third quarter that featured strength in companion animal diagnostics as well as the smaller water segment. We made minor adjustments to our full-year projections to further reflect unfavorable foreign exchange, but these weren’t material enough to shift our fair value estimate. Coming off the pandemic-fueled boost in business in 2020 and 2021, Idexx is now shifting gears for growth that resembles that of the prepandemic days, albeit off a larger pool of pets. Shares remain overvalued, in our view. Thanks to inflationary conditions, Idexx has also rolled out price increases, and thus far doesn’t seem to have received much push back from vets. We view Idexx’s ability to flex its pricing upward as indicative of the firm’s narrow economic moat. The switching costs associated with its benchtop analyzers and practice management software, as well as intangible assets in the form of close relationships with vets, translate into pricing power for Idexx, from our perspective.