• If you are wondering whether Labcorp Holdings is reasonably priced or asking too much at today’s levels, you are not alone. This article is designed to help you size up its valuation with clear numbers.
• The stock last closed at US$282.63, with returns of 2.0% over 7 days, 4.3% over 30 days, 12.3% year to date, 15.9% over 1 year, 33.2% over 3 years and 39.8% over 5 years. These figures will naturally influence how investors think about its current value and risk.
• Recent news around Labcorp has continued to focus on its role as a large U.S. healthcare and diagnostics provider, with investor attention on how its testing and lab services position it within the broader healthcare sector. For anyone tracking the share price moves, the key question is how these developments line up with what you are actually paying for the business today.
• On our checks, Labcorp scores a 4 out of 6 valuation score, which suggests there is more to unpack when you compare different methods such as DCFs, multiples and peer comparisons. We will also look at an even more rounded way to think about value at the end of this article.

Approach 1: Labcorp Holdings Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model takes the cash a business is expected to generate in the future and discounts those projections back to what they are worth in today’s dollars.

For Labcorp Holdings, the latest twelve month free cash flow is about $1.32b. Using a 2 Stage Free Cash Flow to Equity model, future cash flows are projected each year and then discounted. Simply Wall St has explicit projections for 2024 free cash flow of $908.55m and extends this through 10 year estimates, with projected free cash flow for 2035 of about $2.42b, all in $.

When these projected cash flows are discounted and added up, the model arrives at an estimated intrinsic value of about $594.48 per share. Compared with the recent share price of $282.63, this implies the stock is around 52.5% undervalued according to this DCF model.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Labcorp Holdings is undervalued by 52.5%. Track this in your watchlist or portfolio, or discover 53 more high quality undervalued stocks.

Approach 2: Labcorp Holdings Price vs Earnings

For a profitable company like Labcorp Holdings, the P/E ratio is a useful shorthand for what the market is paying for each dollar of earnings. It helps you quickly compare how the stock is priced relative to other businesses that also generate earnings today, not just potential cash flows in the future.

In practice, a “normal” or “fair” P/E tends to move around based on how investors see a company’s growth potential and risk. Higher expected growth or lower perceived risk can support a higher multiple, while slower growth or higher uncertainty usually leads to a lower one.

Labcorp is currently trading on a P/E of 27.40x. That sits above the broader Healthcare industry average of 23.56x, but below the peer average of 33.38x. Simply Wall St’s Fair Ratio metric for Labcorp is 29.98x. This Fair Ratio is a proprietary estimate of what P/E you might expect for the company, based on factors such as its earnings profile, industry, profit margins, market cap and risk characteristics.

Because the Fair Ratio builds in these company specific drivers, it can be more informative than a simple comparison with industry or peer averages. Compared with this Fair Ratio of 29.98x, Labcorp’s actual P/E of 27.40x suggests that the shares may be trading below this particular valuation metric.

Result: UNDERVALUED ON THIS METRIC

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 23 top founder-led companies.

Upgrade Your Decision Making: Choose your Labcorp Holdings Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives let you write your own story for Labcorp by linking what you think about its Oncology and AI opportunities, future revenue, earnings and margins to a financial forecast, a fair value, and a clear comparison to the current share price. All of this is available inside Simply Wall St’s Community page, where Narratives update automatically when new news or earnings arrive. One investor might build a Narrative that leans toward the higher US$325 analyst target, while another leans toward the lower US$260 view, and you can see which story you find more reasonable before deciding how attractive the current price looks next to your own fair value.

Do you think there's more to the story for Labcorp Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.