CHARLES RIVER LABORATORIES INTERNATIONAL, INC. (CRL): what the price assumes

In the published model solve dated 2026-Q2, anchored at $291.50, CHARLES RIVER LABORATORIES INTERNATIONAL, INC. (CRL) is priced for today's economics sustained for ~6.8 years. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-08-30 · Source: https://boothcheck.com/report/CRL

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 10% cost of capital; growth searched up to the 25% self-funding ceiling.

How unusual the bet is: n/a

Valuation X-Ray

Asset, earnings-power and peer-multiple models all land far below the price; ONLY the growth-DCF reaches it. The bet is durable compounding the static frames structurally cannot price (a moat/durability premium).

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Growth Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 9.1%); the inversion above states its own rate.

Per-Model Detail (n=9)

Economic-Unit Decomposition (Sum Of The Parts)

One or more material disclosed units has unresolved economics. Unknown/general is not evidence of homogeneity: segment SOTP is primary but incomplete, consolidated cash flow may remain only a secondary cross-check when every unit shares an enterprise basis, and one sector multiple or target margin is withheld.

No total common-equity value is stated. One or more material units lack a supported unit value. The displayed values are an indicative subtotal; consolidated debt and cash cannot be applied to a fraction of the company.

Solvency

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Six of every ten revenue dollars come from Discovery and Safety Assessment, the regulated preclinical testing arm, which held a 17.7% operating margin in fiscal 2025 even as its revenue slipped 2.0% on cautious client spending.
• The defining risk is written into the company's own filings: the FDA said in April 2025 it intends to expand cell-based and computational alternatives in preclinical safety studies, and the 10-K states plainly that Eliminating the use of animals in research may have material adverse effects on our business, results of operations, or financial condition.
• Reported profit is currently dominated by portfolio surgery rather than operations, with a first-quarter 2026 loss of 30 cents a share carrying a 118.0 million dollar write-down on the CDMO and Cell Solutions businesses that were sold.

Bull Case

Read this company as what it is: a mature supplier to drug development, several years into a demand trough, whose reported numbers are currently being written by the businesses it is exiting rather than the ones it is keeping. That distinction matters more here than usual, because the exits have been large and the core has held.

The core is Discovery and Safety Assessment. In fiscal 2025 DSA generated 2.40 billion dollars of revenue at a 17.7% operating margin, against 18.1% the year before, on volume that fell 2.0%. Giving up forty basis points of margin while volume goes backwards is a business holding price and cost discipline through a downturn, not one losing its position. In the first quarter of 2026 that segment's reported operating margin was 17.4%, up from 15.9%, and management described bookings as solid with the demand environment tracking to plan.

Why the position holds comes down to what the customer is actually buying. Regulated safety testing is not a service a biotech can improvise; it is a package of study data that regulators will accept, produced under audit, in facilities that have been inspected. The 10-K notes that the market for regulated safety assessment services is 60% outsourced or more and that the company operates in over 120 sites and in over 20 countries worldwide. Its research models are described as some of the most extensively used in the world, which in this industry is a genuine barrier: study data generated on a familiar strain is comparable to decades of prior data, and switching supplier means giving that up.

The company has also spent this downturn buying its own supply chain rather than defending sales. In January 2026 it acquired a Cambodian supplier of non-human primates for a total purchase price allocated at 507.3 million dollars, of which 341.0 million was goodwill, explicitly to bring an internal supplier inside the business that serves DSA. Large-model supply has been the industry's tightest constraint and its most expensive input. Owning it converts a volatile purchased cost into an operating one.

At the same time the portfolio has been pruned hard. The CDMO and Cell Solutions businesses have been sold, a European discovery operation was put up in February, and the remaining stake in a sequencing-based quality-control business was bought outright. Those units carried the impairments that wrecked the reported numbers. Removing them removes both the losses and the further write-down risk, and it leaves a company that is essentially research models plus safety assessment plus microbial quality control.

The bear will say the price already assumes the recovery. Fair. But all three segments improved their reported operating margins in the first quarter, the buyback took 200 million dollars of stock off the market in that quarter alone, and the company reaffirmed its 2026 outlook rather than trimming it. In a business whose customers are finally seeing funding return, that is what an inflection looks like before it appears in the annual figures.

Bear Case

Look at what happened to the revolving credit facility. It stood at 616.5 million dollars at the end of fiscal 2025 and at 1.17 billion by March 28, 2026, alongside three 500 million dollar tranches of senior notes maturing in 2028, 2029 and 2031. The quarter that borrowing paid for included a 507.3 million dollar acquisition and 200 million dollars of share repurchases. Net borrowings now sit near 2.5 billion dollars. Buying back stock with revolver capacity in the middle of a demand trough is a bet on your own recovery made with the lender's money, and the revolver is the piece of the stack that reprices.

That leverage sits on reported profits that have nearly vanished. Fiscal 2025 produced 25.2 million dollars of total operating income on roughly 4.0 billion of revenue, against 227.3 million the prior year, after impairments of 165.0 million against goodwill in Biologics Solutions, 109.0 million against CDMO Gene Therapy intangibles and 102.0 million against Cell Solutions intangibles. Those charges were not accounting theatre. They were the acknowledgement that assets bought during the last boom are worth substantially less than what was paid, and the same filing warns that further impairment is possible if cash flows fall below current expectations.

The structural risk is one the company describes better than any outsider could. From the 10-K: In April 2025, the FDA announced its intention to expand the use of scientifically supported cell-based approaches and other new approach methodologies (NAMs), such as organ-on-chip systems, computational modeling, and advanced in vitro assays, in preclinical safety studies; in October 2025, the FDA announced its intention to streamline the approval process for biosimilar drug development and indicated further announcements related to reducing animal testing requirements may be forthcoming; and in November 2025, the U.K. government announced a roadmap to phasing out animal testing in favor of alternative methods. The filing adds that eliminating animals from research would have material adverse effects, while noting the process would be gradual. Gradual is the right word and also the problem: a slow erosion of the regulatory requirement that creates the demand is precisely the kind of risk a multiple built on persistence cannot absorb.

Underneath the regulation, demand is already soft. Organic revenue fell 1.5% in the first quarter of 2026, with declines in both the research models and the safety assessment segments partially offset by manufacturing. Research models organic revenue was down 5.5% in the quarter. Cautious client spending is now the steady state rather than the interruption, and the price is asking for that to reverse and then hold for years.

The floor under all of it is thin but real. The company carries roughly 368 million dollars of equity investments held outside the operating business, which is what would remain if the operating thesis failed entirely. Set against a market value in the eleven billions, that boundary is a rounding difference rather than a cushion. Compare the trajectory to MEDP, which reported a 21.0% operating margin on 24.2% revenue growth in its own filings, and the gap is not in the margin. It is in the direction.

Valuation

What the market is buying at 226.76 dollars a share is time. The price asks for the economics this business shows today to persist for something like seven years without fading, which sounds modest until you look at how often it happens: roughly one in five companies growing at comparable rates has sustained the pace that long. Against its own recent record the near-term rate is unremarkable. The stretch is in the duration, and against the peer group the multiple sits at the very top of the range rather than in the middle of it.

The methods used to triangulate the business split cleanly, and the split is informative. Only the revenue-multiple approach reaches comfortably past today's price, and it does so by applying a sector-wide multiple of sales to a company earning a fraction of the sector's margin. Among the forward cash-flow methods, one lands just under the price on the assumption that current economics simply repeat, and the other lands well above it, which is a way of saying those methods are answering the question of whether the trough is temporary rather than measuring anything independent. The earnings-power lenses, which capitalize free cash flow with no growth credited, put the price at nearly three times where they land. The book-value references, flagged in the model set as floors rather than valuations, sit further below still.

The concrete version of what has to be true is in the segment tables. Fiscal 2025 delivered 25.2 million dollars of total operating income on roughly 4.0 billion of revenue, because the profit DSA earned was consumed by impairments elsewhere and by unallocated corporate costs of 259.7 million. The businesses that produced those write-downs have now been sold. So the bet is legible: the remaining company has to earn something close to the segment-level margins it already reports, on revenue that grows rather than shrinks, for long enough to justify a multiple set at the top of its cohort.

Peers give that bet a scale. MEDP reported a 21.0% operating margin with revenue growth of 24.2%, and IQV a 13.2% margin with 7.3% growth, both on their own filed numbers. Charles River's segment margins sit between those two while its organic revenue is going backwards, which is the combination that makes the duration assumption the whole question.

The balance sheet does not bound the downside as much as it might. Net borrowings near 2.5 billion dollars against three tranches of senior notes and a drawn revolver leave interest as a fixed claim on a profit line that has been near zero for a year, and the roughly 368 million dollars of equity stakes held outside the operating business is the only asset value sitting outside the thesis. The share count has come down about 1.2% a year over four years, with 200 million dollars repurchased in the first quarter alone. Buying stock at the top of a peer multiple range is a decision that will read very differently depending on whether the demand recovery arrives on schedule.

Catalysts

The first quarter of 2026, reported May 7, marked the point where the restructuring stopped being a plan. Revenue was 995.8 million dollars, up 1.2% but down 1.5% organically, and the company reported a GAAP loss of 30 cents a diluted share against earnings of 50 cents a year earlier. The swing was a 118.0 million dollar loss on assets held for sale tied to the CDMO and Cell Solutions divestiture, worth 1.53 a share on its own. On the company's own adjusted basis, first-quarter earnings were 2.06 a share against 2.34 a year earlier, with the adjusted operating margin lower than a year earlier on higher study-related direct costs in safety assessment. Management reaffirmed 2026 guidance for organic revenue and adjusted earnings per share, and repurchased 200 million dollars of stock in the quarter.

Two acquisitions and two disposals reshaped the asset base inside four months. On January 9, 2026 the company exercised its option to acquire the remaining roughly 79% of PathoQuest, a next-generation sequencing provider for manufacturing quality control, for about 60.0 million dollars. On January 14 it closed the purchase of a Cambodian non-human primate supplier, with the preliminary purchase price allocated at 507.3 million dollars including 341.0 million of goodwill, bringing a critical input inside the company. In February a European discovery operation was classified as held for sale, and in May the CDMO and Cell Solutions divestiture completed.

Leadership is also new. Birgit Girshick is presenting the strategy as chief executive, describing a refreshed focus on the scientific portfolio and the client experience. The near-term test is arithmetic rather than rhetorical: guidance assumes organic revenue and adjusted margins improve through the year, and with the loss-making units gone, the second-half reports are the first ones where the continuing business has to show the improvement on its own.

Peer Cohorts (Per Segment, With Filing Citations)

RMS (Research Models and Services) / DSA (Discovery and Safety Assessment) / Manufacturing (Manufacturing Solutions) (reported)

• IQV (IQVIA HOLDINGS INC.)
• FY2025 10-K: …practices when sold separately with consideration of market conditions and other factors, including customer demographics and geographic location. Revenues for services engagements where the transfer of control occurs ratably over time are recognized on a straight-line basis over the term of the arrangement. Revenues…
• FY2025 10-K: …Solutions segment for the year ended December 31, 2025, is $ 8,896 million, the majority of which relates to service contracts for clinical research that represent a single performance obligation. The Company recognized revenue for these contracts over time using a cost-based input method. Revenue was recognized…
• ICLR (ICON plc)
• FY2025 20-F: …based on the achievement of certain contractual milestones. Under these arrangements, the Company contracts with a customer to carry out a specific study, ultimately resulting in delivery of a custom report or data product. These arrangements are a single performance obligation given the integrated nature of the…
• FY2025 20-F: 2) identify the performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies the performance obligation(s), which have been applied to revenue recognized from…
• MEDP (Medpace Holdings, Inc.)
• FY2025 10-K: …its full service outsourcing model, providing services focused on the development, management and execution of clinical trials. As part of this full service approach, the Company utilizes centralized systems, customer - 52 - Table of Contents interface technology, support functions and processes that cross service…
• FY2025 10-K: …on providing full-service Phase I-IV clinical development services and our therapeutic expertise. We believe this combination results in timely and cost-effective delivery of clinical development services for our customers. We believe that we are a partner of choice for small and mid-sized biopharmaceutical companies…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.