While Chewy and its Autoship feature for customers ordering pet food, treats, or medicine is about as "pick-and-shovel" as it gets, there is a hidden gem that may be the ultimate pick-and-shovel pet stock: Idexx Laboratories (IDXX 4.22%).
Idexx Labs is a leading provider of a wide array of point-of-care platforms, diagnostic tests, and Software-as-a-Service offerings for the animal health industry, helping veterinarians care for our furry friends. The stock has delivered total returns of 20% annually since 1994, growing an initial $5,000 investment into $1.6 million today.
Though investing $5,000 today may not yield as dramatic returns as it has already seen -- primarily due to the company's sheer size now -- I still believe Idexx offers market-beating potential. Just how much do I like the stock? It is currently my daughter's second-largest holding, and we'll be looking to add to the position soon after Idexx's share price dipped 18% from its 52-week high.
Here's what makes Idexx's future look so bright.
NASDAQ: IDXX
Key Data Points
The innovation machine that is Idexx Labs
With over 164,500 medical instruments installed globally, Idexx Labs epitomizes a pick-and-shovel investment. Its Catalyst, Premium Hematology, SediVue, and InVue instruments generate recurring revenue from VetLab consumables, reference lab diagnostics, and consulting services used each time a pet's affliction is analyzed.
The company's rapid-assay tests (such as heartworm detection) and vertical stack of veterinary SaaS offerings generate additional recurring revenue, creating a pick-and-shovel powerhouse. In its most recent quarter, 92% of its consumer animal group's sales were recurring, creating a predictable stream of cash that has continuously powered Idexx Labs' stock to new highs.
Image source: Getty Images.
However, I think the best is yet to come for the stock and its investors. During the fourth-quarter earnings call, CEO Jay Mazelsky explained, "The rollout of InVue DX represents one of the most successful product launches in IDEXX history, and the fourth quarter reinforced that trajectory, bringing InVue DX placements for the year to nearly 6,400."
This new InVue DX instrument, launched in 2025, has the potential to be one of Idexx's most important products yet, particularly because it can test for a growing list of cancer types in pets. Idexx has already been testing for canine lymphoma in the U.S. as of 2025 and will roll out these capabilities internationally this year.
Innovating as always, Idexx now plans to offer a panel this year that tests for canine mast cell tumors. These Idexx Cancer DX offerings will detect over 33% of canine cancer cases, and management believes this figure could grow to 50% by 2028 as it expands its abilities to detect more cancer types. As the company extends this cancer detection profile to new types and feline cases, its adjacent pick-and-shovel recurring sales should keep booming as Idexx keeps our pets healthy.
Growing 2025 sales, recurring revenue, and earnings per share by 10%, 8%, and 14%, respectively, Idexx's growth story is far from over. While Idexx stock seems expensive at 43 times forward earnings -- even after its recent dip -- its consistency and stability make it a no-brainer investment in my eyes. Throw in that management has lowered the total outstanding shares by 1.2% annually over the last decade, and I'd argue that Idexx is a truly elite compounder to hold for decades.
