On Thursday, Baird raised the price target for Charles River Laboratories International, Inc. (NYSE:CRL) shares to $271.00, up from the previous target of $270.00, while maintaining an Outperform rating on the stock. Baird's assessment was based on a comprehensive methodology, which includes a variety of financial analyses.
The firm's approach to determining the new price target incorporated a 22.5x multiple in their one-year price-to-earnings (P/E) analysis and a 25.0x multiple in the two-to-five-year P/E analysis.
Additionally, a weighted average cost of capital (WACC) of approximately 9% and a 4.0% terminal growth rate were used in their discounted cash flow (DCF) calculations. For their near-term enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) analysis, a 15.0x multiple was applied.
The analyst noted that there are several risks associated with Charles River Labs (NYSE:CRL) that investors should consider. These risks include the uncertain net impact of COVID-19 in the near to intermediate term, exposure to smaller biotech companies, significant dealings with academic and government clients, the company's debt position, challenges related to acquisition integration, exposure to foreign currency fluctuations, the non-human primate (NHP) supply environment, operations in China, and other industry-related risks.
Despite these risks, Baird's evaluation supports the Outperform rating, indicating a positive outlook on Charles River Labs' share performance. The slight increase in the price target reflects the firm's confidence in the company's potential for growth and profitability.
In other recent news, Charles River Laboratories reported mixed first-quarter results, with a 1.7% decrease in overall revenue primarily due to lower sales in the Discovery (NASDAQ:WBD) Services and Safety Assessment (DSA) businesses.
Despite this, the company reaffirmed its full-year revenue and non-GAAP earnings per share guidance, expressing confidence in demand recovery in the latter half of the year.
Goldman Sachs (NYSE:GS) initiated coverage on Charles River Labs with a Buy rating and a price target of $290.00, identifying the company as a leading entity in the preclinical research sector.
Conversely, TD (TSX:TD) Cowen, Baird, and Evercore ISI adjusted their outlooks on Charles River Labs, reducing their price targets due to concerns about the company's capacity utilization and dependence on the biotech sector's recovery.
Goldman Sachs anticipates that as funding levels return to those seen before the Covid-19 pandemic, Charles River Labs will experience the highest leverage compared to its peers.
Evercore ISI noted early signs of recovery in the industry and positive momentum in manufacturing during the first quarter. These recent developments reflect the ongoing challenges and opportunities faced by Charles River Laboratories in the current market environment.
InvestingPro Insights
Baird's positive outlook on Charles River Laboratories International, Inc. (NYSE:CRL) is echoed by some of the latest metrics and analyst insights. According to InvestingPro, the company's market capitalization stands at a robust $11.02 billion, and it maintains a Price/Earnings (P/E) ratio of 24.92, which adjusts slightly higher to 26.86 on a last twelve months basis as of Q1 2024. These figures align with Baird's use of P/E multiples in their valuation methodology.
Two InvestingPro Tips that may interest investors are the low price volatility that CRL's stock generally trades with, and the prediction by analysts that the company will be profitable this year, which is supported by the fact that it has been profitable over the last twelve months. Additionally, while the company does not pay a dividend, it has demonstrated a high return over the last decade. For investors seeking a more in-depth analysis, there are 5 additional InvestingPro Tips available, which can be accessed with the exclusive promo code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Revenue growth remains modest with a 0.49% increase over the last twelve months as of Q1 2024, and gross profit margins are healthy at 36.51%. The company's operating income margin stands at 15.25%, reflecting solid profitability. These data points may provide investors with confidence in the company's financial health, despite the risks outlined by Baird.
Investors should note that the next earnings date is scheduled for July 31, 2024, which could provide further insights into the company's performance and future outlook. Additionally, the fair value estimates from analysts and InvestingPro stand at $270 and $237.64 respectively, suggesting potential upside from the previous close price of $213.84.
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