Charles River Laboratories International, Inc. – Value Analysis (NYSE:CRL) : November 13, 2017

Capitalcube gives Charles River Laboratories International, Inc. a score of 69.

Our analysis is based on comparing Charles River Laboratories International, Inc. with the following peers – Repligen Corporation, Quintiles IMS Holdings, Inc., Bioanalytical Systems, Inc., SCYNEXIS, Inc. and Thermo Fisher Scientific Inc. (RGEN-US, Q-US, BASI-US, SCYX-US and TMO-US).

Investment Outlook

Charles River Laboratories International, Inc. has a fundamental score of 69 and has a relative valuation of UNDERVALUED.

Fundamental Score

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Company Overview

  • With respect to peers, relative outperformance over the last year is in contrast to the more recent underperformance.
  • It currently trades at a Price/Book ratio of (4.65).
  • We classify CRL-US as Harvesting because of the market’s relatively low growth expectations despite its relatively high returns.
  • CRL-US has a successful operating model with relatively high net profit margins and asset turns.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • Over the last five years, CRL-US‘s return on assets has improved from median to better than the median among its peers, suggesting the company has found relative operating advantages.
  • The company’s relatively high pre-tax margin suggests tight control on operating costs versus peers.
  • While CRL-US‘s revenues growth in recent years has been around the peer median, the stock’s below peer median P/E ratio suggests that the market likely sees the company’s long-term growth prospects to be fading.
  • The company’s level of capital investment is relatively low and suggests it is milking the business.
  • CRL-US has additional debt capacity.

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Leverage & Liquidity

CRL-US has additional debt capacity.

  • With debt at a reasonable 26.06% of its enterprise value compared to an overall benchmark of 25% (Note: The peer median is currently 26.17%), and a well-cushioned interest coverage level of 10.15x, CRL-US has the capacity to borrow some more.
  • All 5 peers for the company have an outstanding debt balance.

CRL-US has maintained its relatively high liquidity profile from the recent year-end.

  • CRL-US‘s interest coverage is similar to its five-year average interest coverage of 10.34x.
  • While its interest coverage increased to 10.15x from 9.60x (in 2016), its peer median decreased during this period to 3.17x from 5.89x.
  • Interest coverage rose 3.27 points relative to peers.
  • CRL-US‘s debt-EV is greater than (but within one standard deviation of) its five-year average debt-EV of 23.35%.
  • Though its debt-EV has remained relatively stable at 26.06% compared to 2016, its peer median has decreased to 26.17% from 27.97% during this period.
  • Relative to peers, debt-EV rose 1.80 percentage points.

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Key Liquidity Items

Company Debt/Enterprise Value (%) Current Ratio Interest Coverage (x) Cash Flow To Total Debt (%)
Repligen Corporation 9.56 1.95 3.65 22.07
Quintiles IMS Holdings, Inc. 31.15 1.22 2.7 12.41
Bioanalytical Systems, Inc. 26.28 0.64 0.15 30.8
SCYNEXIS, Inc. 41.71 7.3 -61.68 -164.34
Thermo Fisher Scientific Inc. 23.3 1.26 5.58 20.58
Charles River Laboratories International, Inc. 26.06 1.88 10.15 33.31
Peer Median 26.17 1.57 3.17 21.32
Best In Class 9.56 7.3 10.15 33.31

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Company Profile

Charles River Laboratories International, Inc. is an early-stage contract research company, which provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and academic institutions around the globe to accelerate their research and drug development efforts. It operates through the following business segments: Research Models and Services, Discovery and Safety Assessment, and Manufacturing Support. The Research Models and Services segment comprises of the production and sale of research models, and also offers services designed to support to clients use of research models in screening drug candidates. The Discovery and Safety Assessment segment offers discovery and safety assessment services, both regulated and non-regulated, in which it include both in vivo and in vitro studies, supporting laboratory services, and strategic preclinical consulting and program management to support product development. The Manufacturing Support segment offers endotoxin and microbial detection, avian vaccine services and biologics testing solutions. The company was founded by Henry L. Foster in 1947 and is headquartered in Wilmington, MA.

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