Charles River Laboratories (CRL)

Conclusion

Charles River Laboratories provides research animal models, drug discovery services and non-clinical safety testing to pharmaceutical and biotechnology clients. At 353.34 USD on 2026-11-09, the market capitalisation is 16.9 billion USD and the enterprise value is 19.5 billion USD.

The verdict is overvalued. The P/E of 419.7 stands far above its ten-year median of 34.2, and EV/EBITDA of 66.6 sits against a median of 17.4. The discounted cash flow gives 120.74 USD per share at a discount rate of 11.6%. The fair value band runs from 128.58 to 192.87 USD with a midpoint of 160.72 USD, giving a margin of safety of -54.5% at the current price. The reverse DCF implies growth of 24.5% a year, while revenue grew 6.6% a year over five years and free cash flow per share grew 6.9%.

What holds the case up is earnings quality: free cash flow conversion of 9.9x over the last twelve months, a Beneish M-score of -3.08, and a share count that shrank at a five-year CAGR of -0.4%. The weakest numbers are interest coverage of 0.08x, net debt to EBITDA of 9.0x, and ROIC of 0.1% against a WACC of 10.5%. If growth slows, these leave little room for error.

Financial health

Financial strength is red. The Altman Z-score of 3.35 sits in the safe zone and the current ratio of 1.41x is solid, but net debt to EBITDA of 9.0x and interest coverage of 0.08x pull the colour down. The quick ratio is 0.86x and debt to equity is 0.88x. The Altman model was designed for manufacturers, so for this services business the zone is only a rough guide. Insolvency risk is low, at about 1.4% by the estimate of the Ohlson model over one to two years, based on figures as of 2025-12-31.

Earnings quality

Earnings quality is green. Free cash flow conversion is 9.9x over the last twelve months and 1.8x over five years, and the accrual ratio is -0.12. The Beneish M-score of -3.08 is in the unlikely range for manipulation. The share count fell at a five-year CAGR of -0.4%, which reflects buybacks. Stock-based compensation is 2.0% of revenue, and free cash flow after it is 319.1 million USD over the last twelve months. The Piotroski score is 4 out of 9, which is neutral. The company beat estimates in all eight of the last quarters, with an average surprise of 8.5%. Current-year estimates rose 2.5% over 90 days, with 8 upgrades and 1 downgrade in the last 30 days. Next-year estimates rose 3.4% over 90 days, with expected growth of 12.1%.

Profitability

Profitability is yellow. The gross margin is 32.9% against a ten-year median of 36.8%, and the operating margin is 14.2% against a median of 14.7%. The net margin is 1.0% against a median of 9.8%. ROIC is 0.1% against a WACC of 10.5%, and the given ROIC minus WACC value is -10.4%. The five-year median ROIC is 8.0%. ROE of 1.3% looks weak even with leverage. The DuPont split shows an equity multiplier of 2.25 and an asset turnover of 0.56, with a negative net margin of -3.6% in 2025. Leverage is therefore masking a thin return on capital.

Growth

Growth is green, though the colour rests on mixed evidence. Revenue grew in 8 of the 10 comparable years. The compound growth rates are 6.6% over five years and 11.4% over ten years, but only 0.3% over three years. Free cash flow per share grew at a three-year CAGR of 22.1%, a five-year CAGR of 6.9% and a ten-year CAGR of 8.4%. The EPS growth history is not available. The next-year EPS growth estimate is 12.1%.

Valuation

Valuation is red. The P/E of 419.7 compares with a ten-year median of 34.2, a premium of 1128.2%. EV/EBITDA of 66.6 compares with a median of 17.4, a premium of 281.8%. P/FCF of 42.2 compares with 24.0, a premium of 76.1%. The P/S of 4.24 compares with 2.92, a premium of 45.4%, and P/B of 5.23 with 5.05, a premium of 3.5%. The DCF gives 120.74 USD per share at a discount rate of 11.6%, with the terminal value at 48% of the total. The fair value from historical multiples is 200.70 USD. The fair value band runs from 128.58 to 192.87 USD, midpoint 160.72 USD, a margin of safety of -54.5%. The band is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse DCF implies growth of 24.5%, against revenue growth of 6.6% and free cash flow per share growth of 6.9% over five years. The company pays no dividend.

Risks

Net debt of 9.0x EBITDA leaves little room to repay borrowings from earnings, and any refinancing at higher rates would add pressure. Interest coverage of 0.08x means operating earnings barely cover interest, so a dip in profit would strain the balance sheet quickly. ROIC of 0.1% against a WACC of 10.5% means the business currently earns well below its cost of capital, which weakens the case for paying today's multiples. The EPS growth history is not available. This analysis has no debt maturity schedule and no revenue split by segment, so refinancing timing and the contribution of each business line cannot be judged. The Ohlson estimate uses year-end 2025 figures, and the tax rate is assumed at 21%.