Here's Why IDEXX Laboratories (NASDAQ:IDXX) Has Caught The Eye Of Investors

Investors are often guided by the idea of discovering 'the next big thing', even if that means buying 'story stocks' without any revenue, let alone profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss making companies can act like a sponge for capital - so investors should be cautious that they're not throwing good money after bad.

Despite being in the age of tech-stock blue-sky investing, many investors still adopt a more traditional strategy; buying shares in profitable companies like IDEXX Laboratories (NASDAQ:IDXX). While profit isn't the sole metric that should be considered when investing, it's worth recognising businesses that can consistently produce it.

Check out our latest analysis for IDEXX Laboratories

How Fast Is IDEXX Laboratories Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so you'd expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. Over the last three years, IDEXX Laboratories has grown EPS by 9.9% per year. That's a pretty good rate, if the company can sustain it.

Top-line growth is a great indicator that growth is sustainable, and combined with a high earnings before interest and taxation (EBIT) margin, it's a great way for a company to maintain a competitive advantage in the market. The music to the ears of IDEXX Laboratories shareholders is that EBIT margins have grown from 27% to 30% in the last 12 months and revenues are on an upwards trend as well. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. To see the actual numbers, click on the chart.

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for IDEXX Laboratories.

Are IDEXX Laboratories Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$41b company like IDEXX Laboratories. But we are reassured by the fact they have invested in the company. We note that their impressive stake in the company is worth US$388m. We note that this amounts to 0.9% of the company, which may be small owing to the sheer size of IDEXX Laboratories but it's still worth mentioning. This should still be a great incentive for management to maximise shareholder value.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? Our quick analysis into CEO remuneration would seem to indicate they are. For companies with market capitalisations over US$8.0b, like IDEXX Laboratories, the median CEO pay is around US$14m.

The IDEXX Laboratories CEO received US$12m in compensation for the year ending December 2023. That is actually below the median for CEO's of similarly sized companies. CEO remuneration levels are not the most important metric for investors, but when the pay is modest, that does support enhanced alignment between the CEO and the ordinary shareholders. It can also be a sign of a culture of integrity, in a broader sense.

Is IDEXX Laboratories Worth Keeping An Eye On?

As previously touched on, IDEXX Laboratories is a growing business, which is encouraging. The fact that EPS is growing is a genuine positive for IDEXX Laboratories, but the pleasant picture gets better than that. With a meaningful level of insider ownership, and reasonable CEO pay, a reasonable mind might conclude that this is one stock worth watching. Now, you could try to make up your mind on IDEXX Laboratories by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

While opting for stocks without growing earnings and absent insider buying can yield results, for investors valuing these key metrics, here is a carefully selected list of companies in the US with promising growth potential and insider confidence.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.