Want to invest in a megatrend supported by baby boomers' move into their retirement years? It's not plastics, unless you count the credit cards aging boomers will use to buy a whole lot of medical tests. All those tests are good news for Motley Fool Stock Advisor recommendation Laboratory Corporation of America (NYSE:LH).

Recently, the news at LabCorp has been increasing margins. For fiscal year 2004, sales rose a somewhat anemic 4.9% over the previous year. However, net earnings jumped 13.1%, because operating margins expanded 130 points to 25.5%. The company spent $378 million from its strong cash flow to buy back its own shares, increasing earnings per share a healthy 16.1%.

Second-quarter results for fiscal 2005 show that revenue rose 8.8% -- 1.1% from increased testing volume and 7.7% from rising prices. Net earnings increased 11% (excluding a one-time investment loss), and earnings per share increased 12.1%. During the quarter, the company bought back $10 million more of its own shares.

The company's margins -- it uses EBITDA (earnings before interest, taxes, depreciations, and amortizations) -- have risen annually from 17.7% in 2000 to 24.1% in 2004. Margins are forecasted to continue that trend, reaching 25.5% by the end of fiscal 2005.

The company revised its 2005 earnings guidance to between $2.75 and $2.80 per share, up $0.03 since initial guidance was issued in February. At the low end of guidance, the stock is priced at 18.6 times 2005 forecasted earnings.

The company didn't change its free cash flow guidance of $440 million to $465 million. Investors should note that LabCorp has been on an acquisition binge. Last year, it spent $1.1 billion to acquire Diamon Systems and Dynacare. So far this year, the company has spent a total of $305 million to buy U.S. Pathology Labs and Esoterix.

The good news is that LabCorp has used cash and debt to expand its business while maintaining strong EBITDA growth. Its acquisitions have helped it to supply the broad range of testing services desired by managed heath-care clients like fellow Stock Advisor pick UnitedHealthGroup (NYSE:UNH) and Wellpoint (NYSE:WLP).

Analysts expect the company to grow earnings 12.5% annually for the next five years. That's 1.5% less than competitor Quest Diagnostics (NYSE:DGX), which sells for a similar 18.8 times 2005 earnings. Small competitor Specialty Laboratories (NYSE:SP) is not expected to be profitable until 2006.

Quest is a better value today based on earnings growth, but both companies are an excellent bet; testing will be a moneymaker for years to come. After all, it will be very difficult for some portion of the baby boomers to entirely avoid such tests.

Are you looking for more great companies like LabCorp and UnitedHealth? Subscribe to Motley Fool Stock Advisor for more of David and Tom Gardner's favorite stocks.

Fool contributor W.D. Crotty does not own shares in any of the companies mentioned.