Shares of laboratory testing firm Laboratory Corp. of America (NYSE:LH), or LabCorp, have marched steadily upward since 2003, from $21 to about $68.44 now. It sounds like all the easy money has been made, but LabCorp and its larger competitor still have what it takes for further upside.

LabCorp, a Motley Fool Stock Advisor pick, reported strong third-quarter results Tuesday. Sales advanced 6.7%, including a 3.2% increase in testing volume and 3.5% pricing growth. Reported net earnings grew an impressive 15.7%, while on a per-share basis, they advanced 23.4%, due to fewer shares outstanding. The company reported a number of figures in the earnings press release excluding certain restructuring and special charges: One involved costs for the retiring CEO. That's too much information, in my opinion, because the end result pointed to strong organic, or internal, growth. The nine-month figures also confirmed the strong results so far in LabCorp's fiscal year.

Management also offered guidance confirming its expectations for continued steady growth. It said it expects full-year 2006 diluted earnings of $3.28 to $3.33, and expects sales growth of 11% to 13% and diluted earnings of $3.68 to $3.83 for next year. Based on the current stock price, the forward P/E multiples are about 21 and 18, respectively.

For Fools also following the cash, LabCorp reports high levels of operating cash and free cash flow. For the past three fiscal years, free cash has exceeded reported net income by at least 20%, illustrating that the price-to-free cash flow numbers run below the P/E numbers. The most recent nine-month numbers confirm the strong cash-generation trends.

LabCorp also has a solid track record of leveraging sales growth into higher net income and cash flow. Over the past five years, sales have grown 11.6% annually while operating cash flow has advanced 18.4% annually. That growth has slowed over the past couple of years because LabCorp and archrival Quest Diagnostics (NYSE:DGX) have found fewer opportunities to acquire competitors, but demographic trends support the clinical lab test industry.

That's because aging baby boomers and overall advances in medicine require higher levels of monitoring, treating, and preventing diseases. Though LabCorp's bread and butter includes the more routine blood tests and other fluid and human tissue tests, "esoteric" tests are becoming more common as medicine becomes customized to individuals and less one-size-fits-all. Plus, esoteric tests offer higher profit margins.

Overall, the space is still extremely competitive because individual hospitals still carry out the bulk of their own tests, and there are a few remaining publicly traded peers, such as Bio-Reference Labs (NASDAQ:BRLI) and MEDTOX Scientific (NASDAQ:MTOX). Less opportunity for acquiring market share has also led to intensified competition between the two giants, as seen in LabCorp's coup in snatching UnitedHealth Group (NYSE:UNH) out of Quest's client list.

In any case, Quest and LabCorp are proving they are able to grow without major acquisitions. LabCorp is trading at a lower multiple over concerns that the UnitedHealth acquisition implies decreased competitiveness, but both are worthy of investment consideration at the right price.

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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.