Seeking Alpha: For Meridian Biosciences, Living Up To The Past Could Prove Challenging

Small-cap diagnostics company Meridian Bioscience (VIVO) is a curious study in quality and growth and how Wall Street processes those attributes. Meridian has built up a very strong testing business, with high-quality rapid point of care tests and a very cost-effective molecular diagnostics platform. Moreover, this company has posted a trailing compound annual revenue growth rate of 10% with returns on invested capital often above 20%. Yet, the stock has had some pronounced choppiness and is only up about 16% over the past five years - significantly lagging rivals like Cepheid (CPHD) and Quidel (QDEL).

I am concerned that there may be too much optimism baked into current expectations. I believe that Meridian is seeing more competition in its core C.dif and flu franchises than many sell-side analysts want to acknowledge and I am worried about the company's rivals launching additional automated platforms that can compete in Meridian's core market. Current expectations seem to be pricing in forward revenue growth of 9% per year, and I think that may be too demanding for this company.

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For Meridian Biosciences, Living Up To The Past Could Prove Challenging