Elanco Animal Health vs. IDEXX Laboratories
Based in Westbrook, Maine IDEXX Laboratories, Inc. (IDXX) and Elanco Animal Health Incorporated (MOMENTUM) in Greenfield, Ind., are two prominent players in the veterinary market. IDXX manufactures and distributes products and provides services for the companion animal, veterinary, livestock and poultry, dairy and water testing markets. It also sells portable electrolytes and blood gas analyzers for the point-of-care human medical diagnostic market. In comparison, ELAN develops and manufactures pet and food products, and sells them to third-party distributors, veterinarians, farm animal and dairy farmers, and supplies aquaculture operations. .
Rising pet adoptions amid remote lifestyles, and with it rising spending on pet food, care, entertainment and grooming, has helped the pet care industry achieves solid growth. Additionally, the development of efficient and rapid diagnostic devices, viable drugs and vaccines, and ancillary services have boosted the performance of the industry.
Because the constant demand for these products and services makes this industry recession proof, it has caught the attention of investors in the current uncertain market conditions. The global pet care market is expected to grow at a pace 6.1% CAGR to 350 billion dollars by 2027. Thus, IDXX and ELAN should benefit from it. But while shares of ELAN have fallen 3.1% over the past month, IDXX has jumped 3.7%. IDXX is also a clear winner with a 15.2% gain over the past year versus a 4.4% loss for ELAN. But which of these actions is a better choice now? Let’s find out.
On January 13, 2022, IDXX announced a series of product and service enhancements that enable veterinary practices to be more efficient while managing increasing patient volumes. IDXX’s IDEXX 4Dx Plus Test offers clinical decision support on VetConnect PLUS, which provides follow-up considerations and patient-specific interpretive assistance to help veterinarians identify signs of an active infection. Its SediVue Dx urinary sediment analyzer now features Neural Network 6.0, its latest and most advanced algorithmic software, powered by 800 million urine sediment images, which will help veterinarians more quickly determine the presence of a urinary tract infection. These time-saving enhancements that provide deeper, actionable insights are expected to see increased demand in the coming months.
On January 20, 2022, ELAN’s Zorbium received U.S. Food and Drug Administration (FDA) approval, which should help it expand its pain management offerings while addressing a need dissatisfied with veterinary practices. Zorbium is an innovative transdermal formulation of an opioid commonly used in cats, allowing veterinarians to provide consistent and reliable pain relief to their post-surgery feline patients for up to four days without the need for repeat injections and injections home. This should help Zorbium expand its reach in global markets.
Recent financial results
IDXX’s revenue for its fourth quarter of fiscal 2021, ended December 31, 2021, increased 11.1% year-on-year to $801.09 million. The company’s gross profit was $456.42 million, representing an 11.5% year-over-year improvement. Its operating income was $199.19 million for the quarter, representing a 7.6% increase over the prior year period. Its net profit was $162.77 million, down 7% from the same period last year. And its EPS was down 6% year-over-year at $1.89. The company had $144.45 million in cash and cash equivalents as of December 31, 2021.
For its fourth quarter of fiscal 2021, ended December 31, 2021, ELAN’s revenue decreased 2.4% year-on-year to $1.11 billion. The company’s non-GAAP pretax profit was $123 million, indicating an 80.9% year-over-year improvement. While its non-GAAP net income rose 84.2% year over year to $105 million, its non-GAAP EPS rose 75% to $0.21. The company had $638 million in cash and cash equivalents as of December 31, 2021.
Past and expected financial performance
IDXX’s EBIT and free cash flow have grown at CAGRs of 23.8% and 26.8%, respectively, over the past three years.
IDXX’s EPS is expected to increase 10% year-over-year in its 2022 fiscal year, ending December 31, 2022, and 15.1% in its 2023 fiscal year. is expected to grow 10.3% year-over-year in fiscal 2022 and 11.2% in fiscal 2023. Analysts expect the company’s EPS to grow to a rate of 11% per year over the next five years.
ELAN’s EBIT and free cash flow have grown at CAGRs of 2% and 19.7%, respectively, over the past three years.
Analysts expect ELAN’s EPS to improve 15.2% year-over-year in its 2022 fiscal year, ending December 31, 2022, and 22.3% in the fiscal year 2023. Its revenue is expected to grow 0.3% year-over-year in fiscal 2022 and 3.7% in fiscal 2023. Analysts expect the company’s EPS growing at a rate of 13% per year over the next five years.
In non-GAAP futures PEG terms, IDXX is currently trading at 2.91x, 107.9% higher than ELAN’s 1.40x. In terms of EV/Forward Sales, ELAN’s 3.86x compares to IDXX’s 13.10x.
ELAN’s revenue over the past 12 months is almost 1.5 times that of IDXX. However, IDXX is more profitable, with a net income margin of 23.2% compared to the negative value of ELAN.
Additionally, the respective 24.6% and 34.7% of IDXX ROA and ROTC compare to ELAN’s 1.4% and 1.6%.
While IDXX has an overall rating of B, which translates to Buy in Our Own POWR Rankings system, ELAN has an overall rating of C, which is equivalent to Neutral. POWR ratings are calculated by considering 118 separate factors, each weighted to an optimal degree.
Both IDXX and ELAN have a B rating for Sentiment, in line with analysts’ expectations of a solid increase in earnings. IDXX’s EPS is expected to increase 10% year-over-year to $9.46 for its 2022 fiscal year, ending December 31, 2022. The consensus EPS estimate of $1.21 for the ELAN’s fiscal year 2022, ending December 31, 2022, represents an increase of 15.2% over the prior year period.
IDXX has a B rating for quality, which is in line with its industry-leading profitability ratios. IDXX’s trailing 12-month net profit margin of 23.2% is well above the industry average. ELAN’s C rating for quality reflects its negative net profit margin.
Among the 163 shares of the Medical – Devices and Equipment industry, IDXX is ranked #21.
ELAN is ranked #45 out of 175 stocks in the Medical – Pharmaceutical industry.
Beyond what we stated above, our POWR rating system also rated IDXX and ELAN for stability, value, growth and momentum. Get all IDXX ratings here. Too, Click here to see additional POWR ratings for ELAN.
Continued demand for pet care products from a broader owner base is expected to drive the performance of IDXX and SYY. However, its higher profitability, in our opinion, makes IDXX a better buy here.
Our research shows that the odds of success increase when betting on stocks with an overall POWR rating of Buy or Strong Buy. Click here to access top-rated stocks in the medical devices and equipment sector, and here for those in the medical and pharmaceutical industry.
Click here to view our 2022 Healthcare Sector Report
IDXX shares were trading at $547.68 per share on Wednesday afternoon, down $4.08 (-0.74%). Year-to-date, IDXX is down -16.82%, compared to a -3.11% rise in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in researching market inefficiencies. She is passionate about educating investors, so they can succeed in the stock market. Continued…