FDA Approvals And Expansion Of Installed Base Will Drive Future Success

Key Takeaways

• bioMérieux's strategic plan targets high growth in organic sales and EBIT, with improvements in revenue and net margins by enhancing operational efficiencies.
  
• New product launches and international expansion are expected to drive future revenue, while price increases and competitive management will support margin growth.
  
• Ambitious growth targets face risks from foreign exchange challenges, market competition, and reliance on unsustainable price increases, impacting revenue and profitability.

Catalysts

Develops and markets in vitro diagnostic solutions for the diagnosis of infectious diseases in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

• bioMérieux's GO
• 28 strategic plan outlines ambitious growth targets, including a 7% annual organic sales growth and a 10% organic EBIT growth at constant exchange rates, aiming for a 20% EBIT margin by 2028, positively impacting revenue and net margins.
  
• The recent product launches, such as SPOTFIRE panels and VITEK REVEAL, approved by the FDA in Q2, serve as new growth drivers and are expected to bolster future revenue streams.
  
• Operational efficiencies, including cost of goods sold (COGS) improvements through automation and manufacturing in-sourcing, are likely to enhance net margins.
  
• The expansion of the installed base, notably 700 new instrument installations, and growing international sales particularly outside of the U.S., signal potential revenue growth.
  
• Price increases across segments like microbiology and industrial applications, alongside effective management of competitive pricing pressures, are expected to sustain net margin improvement.

bioMérieux Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming bioMérieux's revenue will grow by 8.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 10.8% today to 13.7% in 3 years time.
• Analysts expect earnings to reach €654.3 million (and earnings per share of €5.52) by about February 2028, up from €411.3 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 25.8x on those 2028 earnings, down from 32.5x today. This future PE is lower than the current PE for the GB Medical Equipment industry at 33.9x.
• Analysts expect the number of shares outstanding to decline by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.95%, as per the Simply Wall St company report.

bioMérieux Future Earnings Per Share Growth

Risks

• The company's ambitious growth targets are threatened by foreign exchange headwinds, which notably impacted sales and EBIT, potentially affecting overall revenues and earnings.
  
• There are indications of a slowdown in the Industrial Applications segment, with softness in equipment sales potentially leading to lower revenue growth than expected.
  
• Continued reliance on price increases to drive revenue in segments like microbiology and industrial applications could become unsustainable or face resistance, impacting revenue growth.
  
• The entry of competitors, particularly in the U.S. market, where they offer additional panels, might affect market share and hinder future revenue growth in the BIOFIRE segment.
  
• Supply chain challenges affecting competitors could lead to temporary market share gains, but reliance on external vendors poses a risk to cost structure and profitability if disruptions occur.

Valuation

• The analysts have a consensus price target of €121.533 for bioMérieux based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €132.0, and the most bearish reporting a price target of just €90.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €4.8 billion, earnings will come to €654.3 million, and it would be trading on a PE ratio of 25.8x, assuming you use a discount rate of 5.9%.
  
• Given the current share price of €113.3, the analyst price target of €121.53 is 6.8% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.