Charles River Laboratories Intl. Inc CRL 0.52%, a provider of products and services to pharmaceutical companies, is a market share leader that’s well-positioned for expansion, according to Raymond James.
The Analyst
Analyst Michael Baker upgraded Charles River Laboratories from Market Perform to Outperform with a new $140 price target.
The Thesis
Charles River has a leading competitive position, with a product line unrivaled by peers, Baker said in the upgrade note. (See his track record here.)
This puts the company in a position of pricing power at a time when its products and services are becoming increasingly vital as part of the drug development process, the analyst said.
Charles River diversified its business away from more mature markets toward higher-growth segments with larger addressable markets, Baker said. The company operates in a mostly fragmented market, which implies that potential exists for more “robust” M&A opportunities, he said.
Future accretive M& deals that add new capabilities and market share opportunities for Charles River should be sufficient to lift the stock price, the analyst said.
The stock is trading at 19 times Raymond James’ 2019 EPS estimate, which is near the midpoint of its two-year historical forward P/E range of 15 to 22 times.
The analyst’s $140 price target implies a 22 times multiple, which Baker said is justified by a strong biotech funding backdrop, future market share gains and an attractive potential M&A pipeline.
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