Is Labcorp (LH) Offering Value After Recent DCF And P/E Signals?

• If you are wondering whether Labcorp Holdings at around US$253.73 is offering good value today, you are not alone. This article focuses on what the current price might mean for long term investors.
• The stock has returned 1.1% over the last 7 days, with a 2.4% decline over 30 days, while the year to date return is 0.8%. The 1 year return stands at 9.5%, compared to 20.6% over 3 years and 40.5% over 5 years.
• Recent attention on Labcorp has centered on its role as a large US healthcare diagnostics and lab testing provider, as investors consider how its testing volumes and service mix could affect long term cash flows and business resilience. That context helps frame the recent share price moves, as the market continually reassesses what a reasonable price for the stock might be.
• On our valuation checks, Labcorp scores 4 out of 6 for potential undervaluation. This gives it a 4/6 valuation score that we will unpack using several common approaches, before finishing with a more complete way to think about the stock's value that goes beyond any single model.

Labcorp Holdings delivered 9.5% returns over the last year. See how this stacks up to the rest of the Healthcare industry.

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

A Discounted Cash Flow, or DCF, model estimates what a business might be worth by projecting the cash it could generate in the future and discounting those cash flows back to today.

For Labcorp Holdings, the latest twelve month Free Cash Flow stands at about $1.32b. The model uses a 2 stage Free Cash Flow to Equity approach, with analyst estimates for the near term and then further projections extended by Simply Wall St. For example, projected Free Cash Flow for 2024 is $908.55m, with ten year projections rising to $2.39b by 2035, with each year discounted back to reflect the time value of money.

Aggregating these discounted cash flows results in an estimated intrinsic value of about $574.63 per share. Against a current share price of roughly $253.73, the DCF implies a 55.8% discount, which indicates that the shares are trading well below this model’s estimate of value.

Result: UNDERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Labcorp Holdings is undervalued by 55.8%. Track this in your watchlist or portfolio, or discover 885 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Labcorp Holdings.

Approach 2: Labcorp Holdings Price vs Earnings

For a profitable company like Labcorp Holdings, the P/E ratio is a useful way to think about value because it links what you pay directly to the earnings the business is already generating. In general, higher expected earnings growth and lower perceived risk can support a higher “normal” P/E, while slower growth or higher risk usually align with a lower multiple.

Labcorp is currently trading on a P/E of 24.60x. That sits above the broader Healthcare industry average of 22.98x, but below the peer group average of 31.73x. Simply Wall St’s Fair Ratio estimate for Labcorp is 29.46x, which reflects the multiple that might be reasonable given factors such as its earnings profile, industry, profit margins, market cap and company specific risks.

This Fair Ratio is more tailored than a simple comparison with peers or the industry, because it attempts to adjust for Labcorp’s own characteristics rather than assuming all Healthcare names deserve the same multiple. On this basis, Labcorp’s current P/E sits below its Fair Ratio, which indicates that the shares may be undervalued on earnings.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1449 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Labcorp Holdings Narrative

Earlier we mentioned that there is an even better way to think about valuation. On Simply Wall St this is done through Narratives, which are short, clear stories that you or other investors build around Labcorp Holdings by linking your view of its business, future revenue, earnings and margins to a forecast and then to a fair value that you can compare with today’s price. This all happens within an easy tool on the Community page that updates as new news or earnings arrive. For example, one investor might focus on AI oncology diagnostics and partnerships and arrive at a fair value closer to the upper analyst view of about US$325 per share. Another might focus on tariffs, regulatory risks and competition and land nearer the lower end around US$260. This gives you a concrete, evolving way to decide whether the current market price lines up with the story you believe in.

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.

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