Acquisition And Droplet Digital PCR Will Advance Oncology Diagnostics

Key Takeaways

• Bio-Rad's efforts in digital PCR technology and strategic acquisitions aim to expand applications and bolster revenue through oncology diagnostics and rare mutation detection.
  
• Operational improvements and strategic share buybacks are expected to enhance net margins and drive EPS growth.
  
• Exposure to tariffs, reduced government funding, and macroeconomic challenges in China threaten Bio-Rad's margins and revenue growth, especially in Life Science and Diagnostics.

Catalysts

Manufactures and distributes life science research and clinical diagnostic products in the United States, Europe, Asia, Canada, and Latin America.

• Bio-Rad's strategic efforts to advance Droplet Digital PCR technology through partnerships and clinical trials can drive future revenue growth by expanding its application in oncology diagnostics, impacting revenue positively.
  
• The acquisition of Stilla Technologies, expected to close by Q3 2025, may enhance Bio-Rad's offerings in digital PCR and drive revenue growth by expanding into new areas such as targeted rare mutation detection.
  
• Increased demand and multiyear contract renewals, such as with the German Red Cross for Bio-Rad's immunohematology platform, underline the potential for sustainable revenue growth and improved margins.
  
• Operational productivity improvements and cost management initiatives are set to enhance net margins as Bio-Rad builds on lean initiatives and mitigates tariff impacts.
  
• Continuous share buybacks, with significant repurchases made, are expected to boost earnings per share (EPS) by reducing the number of shares outstanding, positively impacting EPS growth.

Bio-Rad Laboratories Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bio-Rad Laboratories's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -85.2% today to 7.6% in 3 years time.
• Analysts expect earnings to reach $206.0 million (and earnings per share of $7.35) by about May 2028, up from $-2.2 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 43.7x on those 2028 earnings, up from -3.2x today. This future PE is greater than the current PE for the US Life Sciences industry at 36.0x.
• Analysts expect the number of shares outstanding to decline by 4.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.1%, as per the Simply Wall St company report.

Bio-Rad Laboratories Future Earnings Per Share Growth

Risks

• The company's reliance on U.S. products being shipped into China exposes it to significant tariff impacts, which could reduce operating margins and overall profitability.
  
• With an expected decrease in government funding for academic research, there is likely reduced demand for Life Science instruments, which could negatively impact future revenues.
  
• The volatility in capital markets has led smaller biotech companies to cut back on equipment spending, potentially reducing expected revenues from the Life Science segment.
  
• The ongoing macroeconomic headwinds, particularly in China, present risks for demand in the Diagnostics segment, which could lead to lower revenue growth than anticipated.
  
• Despite experiencing mid-teens growth in process chromatography, future expectations are moderated to high single-digit growth, which indicates potential overestimation of growth potential in other areas.

Valuation

• The analysts have a consensus price target of $318.667 for Bio-Rad Laboratories 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 $392.0, and the most bearish reporting a price target of just $260.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $2.7 billion, earnings will come to $206.0 million, and it would be trading on a PE ratio of 43.7x, assuming you use a discount rate of 7.1%.
  
• Given the current share price of $256.68, the analyst price target of $318.67 is 19.5% higher.
  
• 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.