Charles River Labs Has A Great, Long-Term Story To Tell

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WG Investment Research


  • Charles River reported Q4 2018 results that beat the top- and bottom-line estimates.
  • This small-cap drug discovery and early-stage development company has a great long-term story to tell. Additionally, I believe that the company's investment thesis keeps getting stronger.
  • I am long Charles River, and I am looking to add to my position in 2019.
  • This idea was discussed in more depth with members of my private investing community, Going Long With W.G.. Start your free trial today »

Charles River Laboratories (NYSE:CRL) has been one of the best-performing stocks in the R.I.P. portfolio. CRL's shares are up 24% on a YTD basis, and the stock is outperforming the S&P 500 (SPY) by almost 25 percentage points over the last 12 months.

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Investors may be asking themselves if they missed the boat, but I would contend that the story is just getting started. As such, I believe that Charles River is a great, long-term buy at today's price, because, as I recently described, this drug discovery and early-stage development company is well-positioned for the future. And the company's most recent results prove it.

The Latest, Encouraging Numbers From Top To Bottom

On February 13, 2019, Charles River reported Q4 2018 results that beat the top- and bottom-line estimates. The company reported adjusted Q4 2018 EPS of $1.49 (beat by $0.09) on revenue of $601.5M (beat by $11.0M), which also compares favorably to the year-ago quarter.

Source: Q4 and Full-year 2018 Earnings Presentation

The highlights:

  • Quarterly revenues were $601.5M, an increase of 25.7% YoY (with organic growth coming in at 11.4%).
  • Cash flow from operations increased by 38% YoY (to $441M).
  • Adjusted net income was $73.2M (YoY increase of 7.3%), and non-GAAP operating margin was 20.3% (60 bps improvement from the prior period).

Charles River finished fiscal 2018 with a bang. The company reported broad-based growth to end the year, but, in my opinion, the real standout for the quarter was its discovery and safety assessment ("DSA") operating segment.

Source: Q4 and Full-Year 2018 Earnings Presentation

As shown, revenue increased by over 40% for the quarter and by over 30% for the fiscal year. DSA has been an area of focus over the last two years, as shown by the quarterly/annual contribution from acquisitions, and it is encouraging that these newly acquired

This article was written by

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Our President and CIO is a CPA with experience in public accounting and the financial services industry. He earned his Master of Accountancy degree in 2008 and his B.S. in Business Management in 2007. He is also a Level III CFA candidate. He has been intrigued by the market from the start. Over the years, he has learned that long-term investing is a discipline that, if followed, will help contribute to building lasting wealth. As such, most of our articles will be about the investments that we plan to hold for at least 3 to 5 years, as long as the company's story does not change. As a Seeking Alpha contributor, our main goal is to write about the companies that are key to our portfolio with the hope of promoting discussion (for or against the investment) from others within the SA community.Please visit our website for more information about W.G. Investment Research LLC.

Disclosure: I am/we are long CRL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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