Just as you don't set bulls loose in a china shop, so too do you want to keep a good deal of distance between excitement and a room full of medical glassware. So perhaps it's a good thing that Motley Fool Stock Advisor selection LabCorpof America
Judging from the company's Q3 2005 earnings results, nothing much seems to go on at LabCorp -- at least not at the corporate level. I'm certain there's plenty enough happening in the company's eponymous laboratories, but there's really precious little excitement going on within the pages of LabCorp's balance sheet, income statement, and the like. To judge from the words on the page, LabCorp just quietly trudges along from quarter to quarter, spewing out cash from its operations and using that cash to pay down debt, buy back shares, and buy the odd acquisition target or two.
In Q3, for example, LabCorp grew its revenues at a sedate 9% pace in comparison with Q3 2004. Its earnings grew in tandem, also about 9%. About the most exciting thing that happened in the quarter, from an investor's perspective, is that LabCorp bought back 1.6 million shares of its own stock and paid off about $57 million worth of debt. The share buybacks in particular helped to boost LabCorp's profits per share into the very low double-digit range, before a series of one-time charges knocked quarterly diluted EPS back down to $0.66, for about a 5% gain.
On the free cash flow front, LabCorp continues its inexplicable reluctance to publish its cash flow statement along with its earnings release. Instead, investors must trawl the depths of the Securities and Exchange Commission's website in search of the number -- which is inevitably there, just never easy to find. This quarter, the company hid it deep within the recesses of a Form 8-K "slideshow" filing.
Difficult as it is to find, however, this information is well worth searching for. For once again, it confirms the massive cash flows spun out by this company from quarter to quarter. In Q3, LabCorp produced $146 million in free cash -- its best result this year. All told, in the first nine months of 2005, the company has generated $342 million in FCF, putting it firmly on track toward this year's goal of $440 million to $465 million. Should the company hit even the low end of that guidance, it would be valued at under 16 times FCF, smack dab in between its projected growth rate (12%) and its return on equity (19%.)
Or in other words, and quite unsurprisingly, the company looks valued just about right.
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Fool contributor Rich Smith has no position in LabCorp.