IDEXX Laboratories vs. Zomedica: Which Pet Stock is a Better Investment for 2022?

IDEXX Laboratories, Inc. (IDXX) and Zomedica Corporation (ZOM) are two prominent players in the veterinary market. IDXX manufactures and distributes products and provides services for the companion animal, veterinary, livestock and poultry, dairy, and water testing markets. It also sells portable electrolytes and blood gas analyzers for the human point-of-care medical diagnostics market. In comparison, ZOM is a development stage veterinary diagnostics and pharmaceutical company that discovers, develops, and commercializes drugs, devices, and diagnostics for the health and wellness of companion animals.

The increasing adoption of pets since the pandemic, resulting in a rising demand for quality pet food, medications, and other pet-friendly products, enabled pet companies to profit substantially last year. Moreover, companies’ offering of accident and illness pet insurance and virtual check-up services, and the inelastic demand for pet food, making it a part of the consumer staples sector, has increased the investor attention in this recession-proof industry, as evident from the ProShares Pet Care ETF’s (PAWZ) 1.7% gains over the past month.

The growing demand has incentivized companies to develop viable and efficient drugs, vaccines, and diagnostic products to detect and treat air and food-borne or other infectious diseases. The global pet care market is expected to grow at 6.1% CAGR and reach $350 billion by 2027. So, both IDXX and ZOM are expected to benefit substantially this year.

While ZOM returned 0% over the past year, IDXX has surged 23.1%. IDXX is a clear winner with 24.5% gains versus ZOM’s 76% in terms of the past nine months’ performance. But which of these stocks is a better pick now? Let us find out.

Latest Developments

IDXX acquired ezyVet, a cloud-based practice information management system (PIMS), on June 2, 2021. With the acquisition, IDXX should expand its world-class cloud software offerings to support customers with technology solutions that raise the standard of patient care, improve practice efficiency, and enable more effective communication with pet owners.

On October 1, 2021, ZOM acquired the Pulse Veterinary Technologies business, a provider of shock wave therapy devices, for $70.9 million in an all-cash stock transaction. PulseVet devices’ high-energy sound waves stimulate cells and release healing growth factors in the body that reduce inflammation, increase blood flow, and accelerate bone and soft tissue development. Both the stocks are looking forward to expanding their product offerings, technologies, and product development efforts.

Recent Financial Results

IDXX’s revenue for its fiscal 2021 third quarter, ended September 30, 2021, increased 12.3% year-over-year to $810.42 million. The company’s gross profit came in at $472.92 million, representing an 11.9% year-over-year improvement. Its income from operations came in at $225.96 million for the quarter, indicating a 31.5% rise from the prior-year period. IDXX’s net income came in at $175.18 million, up 19.7% from the year-ago period. Its EPS increased 20.1% year-over-year to $2.03. The company had $145.20 million in cash and cash equivalents as of September 30, 2021.

For its fiscal 2021 third quarter, ended September 30, 2021, ZOM’s loss from operations came in at $6.41 million for the quarter, up 28.2% from the prior-year period. While its net loss increased 27.4% year-over-year to $6.35 million, its loss per share remains unchanged at $0.01. The company had $271.41 million in cash and cash equivalents as of September 30, 2021.

Past and Expected Financial Performance

IDXX’s total assets grew at a CAGR of 15.6% over the past three years. Analysts expect IDXX’s EPS to increase 25.2% year-over-year for the fiscal year 2021 and 12% in 2022. Its revenue is expected to grow 11.1% year-over-year for fiscal 2022.

In comparison, ZOM’s total assets increased at a CAGR of 304.6% over the past three years. ZOM’s EPS is expected to remain negative in the fiscal 2021 and null in 2022. The company’s revenue is expected to increase 245.8% year-over-year in fiscal 2022.

Valuation

In terms of non-GAAP P/E, IDXX is currently trading at 72.50x, compared to ZOM’s negative 35x. In terms of trailing-12-month Price/Sales, IDXX’s 16.48x compares with ZOM’s 5737.70x.

Profitability

IDXX’s trailing-12-month revenue is almost 60003.8 times ZOM’s. IDXX is also profitable, with a 58.8% gross profit margin versus ZOM’s negative value.

Furthermore, IDXX’s ROE, ROA, and ROTC of 126.5%, 25.9%, and 36.4%, respectively, compare with ZOM’s negative values.

POWR Ratings

While IDXX has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, ZOM has an overall F grade, equating to Strong Sell. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.

IDXX has an A grade for Quality, consistent with its higher-than-industry profitability ratios. IDXX’s 58.8% trailing-12-month gross profit margin is 6.1% higher than the 55.4% industry average. ZOM’s F grade for Quality is in sync with its negative gross profit margin.

IDXX has a B grade for Sentiment, consistent with optimistic analyst estimates. IDXX’s EPS is expected to increase 25.2% year-over-year to $8.40 in the fiscal year 2021. ZOM’s D grade for Sentiment is in sync with its negative EPS estimates for the fiscal year 2021.

Of 170 stocks in the Medical - Devices & Equipment industry, IDXX is ranked #19. ZOM is ranked #199 of 201 stocks in the Medical - Pharmaceuticals industry.

Beyond what we have stated above, our POWR Ratings system has also rated IDXX and ZOM for Value, Momentum, Stability, and Growth. Get all ZOM ratings here. Also, click here to see the additional POWR Ratings for IDXX.

The Winner

Given the rising demand for viable drugs and efficient diagnostic devices in the industry, both IDXX and ZOM should benefit substantially in the coming months. However, higher profitability and lower valuations make IDXX a better buy here.

Our research shows that the odds of success increase if one bets on stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Medical - Devices & Equipment industry, and here for those in the Medical - Pharmaceuticals industry.

IDXX shares were trading at $583.46 per share on Wednesday afternoon, down $21.96 (-3.63%). Year-to-date, IDXX has declined -11.39%, versus a -1.39% rise in the benchmark S&P 500 index during the same period.

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.

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