Last Update 20 Jan 26
Fair value Increased 0.12%LH: AI Oncology And Alzheimer’s Testing Will Support Balanced Future Outlook
Analysts have inched up their price target on Labcorp Holdings to about US$300 per share. This reflects updated assumptions around slightly higher revenue growth, a modestly adjusted profit margin profile, and a similar forward P/E multiple.
What's in the News
- Labcorp expanded its Plasma Detect molecular residual disease portfolio, including Plasma Detect ID for stage I to IIIA non small cell lung cancer and nationwide Plasma Detect Genome access for stage III colon cancer. The expansion aims to support earlier detection of cancer recurrence and more tailored surveillance using ctDNA testing with a reported LOD95 of 0.005% (Key Developments).
- Recent peer reviewed studies in Nature Medicine and Clinical Cancer Research featured Labcorp Plasma Detect in diffuse pleural mesothelioma and head and neck cancer. Researchers used the assay to track early disease progression, assess progression free survival, and explore post surgical monitoring using lymph fluid alongside plasma (Key Developments).
- Lunit and Labcorp entered a collaboration in digital pathology and AI for oncology research and care, using whole slide imaging and AI based spatial profiling to study tumor immune microenvironments in non small cell lung cancer, including MET exon 14 skipping and MET amplified tumors. Early work from this collaboration was presented at SITC and AMP conferences (Key Developments).
- Labcorp plans to offer Roche Diagnostics' Elecsys pTau181 blood test for Alzheimer’s disease assessment in primary care, with nationwide availability targeted by early 2026. This will extend access to an FDA cleared blood based biomarker that can be ordered for adults 55 and older with cognitive concerns and performed via routine blood draw (Key Developments).
- From July 1, 2025 to September 30, 2025, Labcorp repurchased 100,000 shares for US$27.71m, bringing total buybacks under its December 9, 2021 program to 14,359,458 shares, or 15.97%, for US$3,415.51m. The company also updated its 2025 revenue guidance to a range of 7.4% to 8.0% (Key Developments).
Valuation Changes
- Fair Value: The updated model output is US$300.06 per share, compared with the prior US$299.71 per share, a very small upward adjustment.
- Discount Rate: This remains effectively unchanged at about 6.96%, indicating a consistent risk and return assumption in the model.
- Revenue Growth: Assumed long term annual revenue growth has edged up from 4.80% to about 5.07%, reflecting slightly higher top line expectations in the model.
- Net Profit Margin: The assumed net margin has shifted from about 8.55% to roughly 8.48%, a small reduction in the profitability assumption.
- Future P/E: The forward P/E input has moved marginally from 21.66x to about 21.68x, leaving the valuation multiple effectively steady.
Key Takeaways
- Strategic collaborations and acquisitions are expected to drive growth in high-growth therapeutic areas and partnerships with health systems.
- Introduction of innovative tests and tech enhancements is anticipated to improve margins and earnings, with initiatives offsetting rising personnel costs.
- Tariffs, regulatory changes, and competitive pressures could negatively affect Labcorp's revenue growth, margins, and earnings amidst global economic shifts and market challenges.
Catalysts
About Labcorp Holdings- Provides laboratory services.
- Labcorp's strategic collaborations and acquisitions, such as with Inspira Health and BioReference Health, are expected to drive revenue growth by expanding its presence in high-growth therapeutic areas like oncology and strengthening partnerships with health systems.
- The introduction of innovative tests in oncology, women's health, autoimmune disease, and neurology is anticipated to capture more test volume and outpace growth in the broader market, positively impacting revenue and earnings.
- The use of AI and technology innovations is enhancing operational efficiencies, improving margins through platforms like eClaim Assist and Labcorp Diagnostic Assistant.
- The Invitae integration is on track to be slightly accretive to earnings for the full year, contributing to overall margin expansion and earnings growth.
- Labcorp's LaunchPad initiative continues to produce expected cost savings, mitigating higher personnel costs and supporting margin expansion.
Labcorp Holdings Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Labcorp Holdings's revenue will grow by 5.1% annually over the next 3 years.
- Analysts assume that profit margins will increase from 5.7% today to 8.3% in 3 years time.
- Analysts expect earnings to reach $1.3 billion (and earnings per share of $16.62) by about September 2028, up from $763.4 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.4x on those 2028 earnings, down from 30.3x today. This future PE is greater than the current PE for the US Healthcare industry at 21.0x.
- Analysts expect the number of shares outstanding to decline by 0.64% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.78%, as per the Simply Wall St company report.
Labcorp Holdings Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The impact of tariffs and regulatory changes could create cost pressures, affecting Labcorp Holdings' overall revenue growth and net margins, as they must either absorb costs or pass them on to customers.
- Ongoing shifts in the macroeconomic landscape, such as foreign exchange volatility and global economic conditions, could adversely impact Labcorp's revenue and earnings projections.
- The potential financial implications of PAMA (Protecting Access to Medicare Act) could lead to a $100 million impact on revenue, affecting net earnings if the legislation goes into effect without a delay or amendment.
- Competitive pressures in the Diagnostic Laboratories sector may affect pricing and margins, impacting Labcorp's revenue and net margins as contracts come up for renewal or new competitive bids are issued.
- The unpredictability and possible delays in clinical trial starts, due to regulatory review processes and biopharma R&D funding, could impact the Biopharma Laboratory Services segment's revenue and earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $293.765 for Labcorp Holdings based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $325.0, and the most bearish reporting a price target of just $260.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $15.6 billion, earnings will come to $1.3 billion, and it would be trading on a PE ratio of 22.4x, assuming you use a discount rate of 6.8%.
- Given the current share price of $278.11, the analyst price target of $293.76 is 5.3% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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