Mesa Labs MLAB is a small-cap medical provider of quality control monitoring and validation instruments serving niche markets in healthcare, industrial, pharmaceutical, medical and food processing applications.
MLAB delivered a big 107% earnings beat in early November that compelled analysts to significantly raise estimates for this year and next, thus pushing the stock into the upper realms of the Zacks Rank.
Mesa reported EPS of $2.88 per share, beating the Zacks Consensus Estimate of $1.39. This compares to earnings of $1.87 per share a year ago. These figures are adjusted for non-recurring items.
Upward Revisions
This snap-back was a welcome sign for investors after the prior quarter, where it was expected Mesa would post earnings of $1.95 per share when it actually produced EPS of only $1.17, delivering a negative surprise of -40%.
During the most recent stock correction in October, MLAB shares fell below $120. They then rallied sharply back above $180 on the big earnings beat.
For the full fiscal year 2023 (ends in March) analysts boosted the EPS consensus for Mesa a whopping 39% from $6.57 to $9.15, representing 29% annual growth.
Even more encouraging is that the EPS consensus for fiscal 2024 (begins in April) jumped 21% from $7.62 to $9.23.
Organic and Acquisitions Growth
Mesa has been able to push organic growth to over 10% as the company expands within 4 major verticals: Sterilization & Disinfection Control, Biopharmaceutical Development, Calibration Solutions, and the newest arena of Clinical Genomics.
The company has also made over 12 acquisitions in the past ten years, which have driven 5-year CAGR to 17%.
Here’s what I wrote about their newest strategic play in late 2021…
MLAB Adds a Clinical Genomics Division
On 9/14/21, Mesa Laboratories announced that it has entered into a definitive agreement to acquire Agena Bioscience for a cash purchase price of $300 million. Headquartered in San Diego, Agena is a leading molecular diagnostics tools company that develops, manufactures, and supplies highly sensitive, low-cost, high-throughput, genetic analysis solutions to clinical labs and development partners globally.
Peter Dansky, CEO of Agena, will join Mesa to lead the new Clinical Genomics Division.
Excluding the impact of COVID-19 related revenues, Agena is expected to add between $63 million to $67 million of revenues — about a 50% increase — during the first 12 months of ownership, deliver high single digit organic revenues growth over the next several years and excluding the impact of purchase accounting, generate gross profit percentages in the mid to high 60’s.
Additionally, excluding the impact of COVID-19 related revenues, purchase accounting and integration expenses, Mesa expects adjusted operating income as a percentage of revenues to approach 20% for the same first 12 months of ownership.
Bottom line on Mesa Labs: While MLAB has yet to return to its 2019 EPS peak above $6, topline growth of nearly 24% this year to $228 million is making new records. As the stock trades at only 3.8 times sales with a market cap of $870 million, that growth in key lifesciences arenas could make it a desirable acquisition target itself. I would always be a buyer on dips under $150 as I have recommended since I first profiled the company in 2018.
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Mesa Laboratories, Inc. (MLAB) : Free Stock Analysis Report
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