Shares of leading pet healthcare diagnostics provider Idexx Laboratories (IDXX -1.26%) were up by 9% this week as of 4 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence.
Idexx Labs reported fourth-quarter earnings Monday morning that surpassed analysts' expectations for revenue and earnings per share (EPS).
A strong Q4 and even better guidance for 2025
Idexx delivered revenue and EPS growth of 6% and 13% in Q4, but its guidance appears to have caught the market's attention. Looking ahead to 2025, management expects the company to grow sales by 4% to 7%, while EPS is projected to jump between 10% and 15%.
While these may not seem like incredible results, this growth is exceptional, considering that veterinary visits per practice have declined for 12 consecutive quarters. After pulling forward growth during the pandemic, the veterinary industry has yet to return to normal, making Idexx's Q4 results and guidance reassuring for investors.
The next chapter of Idexx's growth story?
Idexx operates using a razor-and-blades business model. It installs diagnostic instruments at veterinary clinics and then generates recurring revenue from the equipment.
Once these instruments are in place, the company collects recurring revenue from consumables, reference lab diagnostic assistance, and consulting services. These recurring sales equal 79% of Idexx's total revenue and give the company very steady financials from year to year.
The company will launch its newest "razor" -- the Idexx inVue Dx cellular analyzer -- in March this year, potentially starting a new wave of growth. This new instrument can detect canine lymphoma early and could expand to most cancer types within three years, according to management.
Trading at 43 times earnings, Idexx trades at a premium valuation, but I believe it remains a once-in-a-decade opportunity, even after rising this week.
