Stock Spotlight: Charles River Laboratories International
When you combine a stock with the highest PowerRating possible with an industry with the highest possible PowerRating what do you get?
How about Charles Rivers Labs International [CRL@CRL], a ten-rated stock in a ten-rated industry, as our featured Stock Spotlight for the week?
It almost goes without saying that when investors are looking for stocks that are likely to be higher in a year’s time, they cannot do much better than to pick from among the highest rated stocks from the highest rated industries. This is the combination we recommend most highly to investors using our PowerRatings: stick with stocks with high PowerRatings of 9 or 10, that come from industries with PowerRatings of 7 to 10. Charles Rivers Labs International, a biotechnology company that specializes in providing animal research models for use in research and development for new drugs, devices and medical therapies, is very much that kind of stock.
With a PowerRating of 10, Charles Rivers Labs International belongs to that elite class of stocks that is more reliable than the average stock in terms of being higher after one year. Based on our research, which included thousands and thousands of simulated trades between
1995 and 2006, we found that stocks with PowerRatings of 10 were higher one year later more than 81% of the time. Compare this to the average stock, which has been higher after a year less than 68% of the time.
The highest PowerRating stocks have not only been more reliable than the average stock. These 10-rated stocks have also outperformed the average stock by a significant margin. Our research revealed that stocks with PowerRatings of 10 tended to gain, on average, more than 20%, in a year’s time. This was significantly better than the average stock, which has tended to gain an average of 12-13% in a year.
What should make Charles River Labs especially attractive to investors is the fact that not only does the company have a high PowerRating, but also the company comes from an industry, Biotechnology, that also has the highest possible PowerRating, a 10.
Industry group strength is a great asset for a stock. It can be compared to the wind in the sails of a boat, able to move the vessel even further and faster than it might be able to move under its own power. Our research into industry group behavior over the past several year tells us that stocks from industries with PowerRatings of 10 have produced average annualized gains of more than 35%. This is more than double the performance of the average industry, which has provided gains of 14.61% on an average annualized basis.
Charles Rivers Labs International has a P/E of 29.50. The stock is in the upper half of its 52-week price range of $69.04 to $43.40. The company shares the Biotechnology industry with a number of other high PowerRating stocks such as
Genentech Inc. [DNA@DNA] and Techne Corporation [TECH@TECH], both with PowerRatings of 8.
As I mentioned previously, Charles Rivers Labs is a specialized biotechnology company
involved in drug discovery and development.
Their products and services have brought them a clientele that includes most of the major pharmaceutical and biotechnology companies in the world, as well as academic and government research institutions. As a major outsourcing destination, Charles Rives Labs plays an important role in helping the pharmaceutical and biotechnology industries become both more profitable and efficient by
controlling development costs and allowing pharmaceutical and biotechnology companies to focus on their own research and development efforts.
David Penn is Senior Editor at PowerRatings.net