Moderate Price-to-Sales Ratio
Decent Gross Profit Margin
Manageable Debt Levels
Good Liquidity Ratios
Stable Demand Environment
Cost-Saving Initiatives
Improvement in Biotech Demand
Restructuring for Future Growth
Extremely High P/E Ratio
High EV/EBITDA Ratio
Low Net Profit Margin
Low Return on Equity
Low Cash Ratio
Interest Coverage Concern
Declining Revenue
Uncertain Recovery in Pharma Demand
Pricing Headwinds
Charles River Laboratories is navigating a challenging demand environment while implementing significant cost-saving measures. The company's long-term strategic positioning and improving biotech demand provide some optimism, but ongoing revenue declines and uncertain pharma demand recovery pose risks.
Analysis Date: February 19, 2025
Last Updated: March 11, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$2.99
Current Market Price: $136.91
IV/P Ratio: 0.02x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
-4473.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for CRL
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (571.54)
P/B ratio ≤ 1.5 (2.02)
Current ratio ≥ 2.0 (1.41x)
Long-term debt < Net current assets (6.66x)
Margin of safety (-4473.0%)
CRL does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
The gross profit margin of 31.83% reflects a healthy ability to generate profit from sales before accounting for operating expenses.
The net profit margin of 0.30% is very low, indicating that the company struggles to convert revenues into actual profit, which raises concerns about cost control and overall profitability.
The return on equity (ROE) of 0.34% suggests that the company is not generating a satisfactory return on shareholders' equity, indicating inefficiency in using capital.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
0.34%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
-2.84%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
31.83%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
0.30%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
The debt-to-equity ratio of 0.79 and debt-to-assets ratio of 0.36 indicate that the company manages its debt levels relatively well, suggesting a balanced approach to financing.
The current ratio of 1.41 and quick ratio of 1.13 suggest that the company has sufficient short-term assets to cover its short-term liabilities, indicating solid liquidity.
The cash ratio of 0.20 indicates limited cash reserves relative to current liabilities, which could pose a risk in meeting short-term obligations.
An interest coverage ratio of 2.08 suggests that the company only barely covers its interest expenses, indicating potential challenges in meeting debt obligations if earnings decline.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.78x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q4 2024
Current Ratio
Current assets divided by current liabilities
1.41x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q4 2024
The company has noted stability in key performance indicators for DSA demand, including a stable net book-to-bill ratio and cancellation rates. This indicates a consistent demand for services amidst market challenges.
Charles River is implementing significant restructuring initiatives expected to yield annualized savings of approximately $225 million by 2026. This proactive approach helps maintain margins despite revenue declines.
The company experienced a decline in organic revenue by 2.8% for the full year of 2024, primarily driven by lower DSA revenue and client spending constraints.
The company anticipates stable to slightly improved demand trends from small and mid-sized biotech clients, contributing positively to future revenue growth.
Charles River's strategic initiatives, including rightsizing and optimizing operations, position the company to capitalize on future market opportunities as biopharmaceutical spending rebounds.
The company does not expect a recovery in large pharma demand until 2026, indicating a prolonged period of revenue pressure and uncertainty in that segment.
The company is facing pricing headwinds in the DSA segment as clients become more price-sensitive, impacting revenue growth potential.