IDEXX Laboratories Inc (IDXX)

Conclusion

IDEXX Laboratories develops and sells diagnostic instruments, tests and software for companion animal veterinarians, livestock and poultry, dairy, and water testing. At 706.65 USD on 9 November 2026, the market capitalisation is 55.7 billion USD.

The verdict is overvalued. The P/E of 47.1x is below its ten-year median of 58.6x, and EV/EBITDA of 33.7x is below its median of 37.8x. However, the DCF gives 240.32 USD per share, and the fair value band runs from 448.03 to 672.04 USD with a midpoint of 560.03 USD, a margin of safety of -20.7% at the current price. The reverse DCF implies growth of 24.2% a year, while the company delivered revenue growth of 9.7% a year over five years and free cash flow per share growth of 15.9% a year over the same period.

What holds the case up is a return on invested capital of 45.8% against a WACC of 12.4%, free cash flow conversion of 110.0% on a trailing basis, and an Altman Z-score of 23.6. What would break it is the implied growth of 24.2%, which is well above what has been delivered, the price-to-sales ratio of 11.9x, slightly above its median of 11.2x, and a quick ratio of 0.64.

Financial health

The financial strength is green, supported by an Altman Z-score of 23.6, net debt to EBITDA of 0.46 and interest coverage of 42.2x. The current ratio of 1.19 is only neutral, and the quick ratio of 0.64 shows that the company relies on inventory and receivables to cover short-term obligations. Debt to equity is 0.52. The Altman model was designed for manufacturers, and IDEXX is partly one, so its zone of safe is a reasonable guide. Insolvency risk: low, about 0.2% by the estimate of the Ohlson model over one to two years. The Ohlson estimate is based on 2025 year-end figures.

Earnings quality

The earnings quality is green. Free cash flow conversion is 110.0% on a trailing basis and 86.7% over five years, and the accrual ratio is -3.6%, meaning cash earnings exceed reported earnings. Stock-based compensation is 1.4% of revenue, and free cash flow after it is 1.23 billion USD. The share count fell by 1.4% a year over five years, so buybacks have more than offset dilution. The Piotroski score is 8 out of 9, and the Beneish M-score of -2.23 points to an unlikely manipulator. The company beat analyst estimates in all eight of the last quarters, with an average surprise of 6.7%. Analysts raised the current-year estimate by 1.6% over 90 days and the next-year estimate by 1.3%.

Profitability

The profitability is green. The gross margin of 62.7% is above its ten-year median of 58.4%, the operating margin of 32.3% is above 26.2%, and the net margin of 25.4% is above 20.8%. ROIC is 45.8% against a WACC of 12.4%, a ROIC minus WACC value of 33.4%, which the company is classed as creating value. Return on equity of 63.3% is flattered by leverage: the DuPont split shows a net margin of 24.6%, an asset turnover of 1.28 and an equity multiplier of 2.09, so most of the return comes from operations rather than debt. The five-year median ROIC is 43.6%.

Growth

The growth is green. Revenue compounded at 8.5% over three years, 9.7% over five years and 10.4% over ten years. Earnings per share compounded at 17.8% over three years, 14.4% over five years and 20.4% over ten years. Revenue grew in all ten of the last ten years. Free cash flow per share compounded at 41.0% over three years, 15.9% over five years and 24.8% over ten years. The consensus next-year earnings growth is 12.6%.

Valuation

The valuation is red. The P/E of 47.1x is 19.7% below its ten-year median of 58.6x, and the P/FCF of 42.8x is 33.8% below its median of 64.6x. The price-to-sales ratio of 11.9x is 6.5% above its median of 11.2x. The DCF gives 240.32 USD per share, using a discount rate of 12.55%, a 2.5% terminal growth rate and a 10.4% growth rate for the first stage. The terminal value accounts for 43.9% of the DCF. The fair value from historical multiples is 879.75 USD, which uses the company's past multiples and is a separate figure. The fair value band is an order-of-magnitude estimate built on fixed assumptions, a 5% equity risk premium and capped growth, not a price target. The reverse DCF implies growth of 24.2% a year, well above the revenue growth of 9.7% and free cash flow per share growth of 15.9% delivered over five years. IDEXX pays no dividend.

Risks

A current ratio of 1.19 and a quick ratio of 0.64 leave limited room if receivables or inventory weaken, and a fall in operating margin from 32.3% toward its ten-year median of 26.2% would reduce the ROIC cushion. Five-year free cash flow conversion of 86.7% is well below the trailing 110.0%, so the strong recent cash generation may not persist. The price implies growth of 24.2% a year, so any slowdown in revenue or earnings would weigh heavily on the valuation. The operating margin stability figure of 15.2% is not interpreted here. The analysis has no debt maturity schedule and no revenue split by segment, so the refinancing profile and the contribution of each business cannot be assessed. The insolvency estimate and the fair value are models built on assumptions, not forecasts.