Is Labcorp Stock a Buy as Growth Improves but Valuation Stays Rich?

Labcorp’s Specialty Mix Supports the Bull Case

Specialty testing remains a central growth driver. Oncology, women’s health, autoimmune disease and neurology produced double-digit revenue growth in the first half of 2026, helping Labcorp win health-system and provider customers.

Per the Zacks Consensus Estimate, the company’s 2026 revenues are expected to grow 5.6% year over year.

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The company also expanded its test menu and access points. New oncology offerings, a broader Epic collaboration and additional health-system relationships can support test utilization and a favorable mix because specialty patients often require more testing over time. Quest Diagnostics Incorporated DGX is a relevant diagnostics peer, with a broad testing portfolio that includes specialty and oncology services.

LH’s Margin Gains Improve Earnings Quality

Second-quarter adjusted operating margin expanded 70 basis points year over year to 15.8%. Diagnostics margin rose 50 basis points to 18%, while Biopharma Laboratory Services margin increased 130 basis points to 17%.

Labcorp attributed the gains to organic growth, operating efficiencies and actions within Early Development. Launchpad, automation, artificial intelligence and other technology initiatives remain part of the productivity effort. Medpace Holdings, Inc. MEDP, a full-service clinical research organization with central laboratory capabilities, provides a useful comparison point for the competitive biopharma-services landscape.

Labcorp’s Valuation Leaves Less Room for Error

LH trades at 16.7X forward 12-month earnings, above the Zacks sub-industry multiple of 16.2X and its own five-year median of 14.4X. The current multiple is also closer to the upper end of its five-year range of 10.5X to 17.8X.

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That premium raises the bar for execution. Continued earnings growth, margin expansion and delivery against the raised 2026 outlook become more important when investors are paying above the stock’s historical median valuation.

LH Still Faces Reimbursement and Cost Risks

Reimbursement remains a constraint for Diagnostics. Affordable Care Act-related changes reduced second-quarter diagnostic volume by an estimated 20-30 basis points, and Labcorp continues to assume a 30-basis-point full-year effect. Pressure tied to Protecting Access to Medicare Act reimbursement is another risk.

Cost inflation, tariffs, currency swings and competition add uncertainty. Cost of revenues rose 5.6% year over year in the second quarter, while full-year guidance includes foreign-currency benefits to enterprise and Biopharma Laboratory Services growth. A reversal in exchange rates could make the outlook harder to achieve.

Labcorp’s Ratings Point to a Balanced Setup

The operating picture has improved, but the valuation premium argues against treating the recent momentum as an automatic buy signal. Labcorp currently carries a Zacks Rank #3 (Hold), which is consistent with a more balanced near-term stance than the stronger buy-rated categories.

Its Value Score of B, Growth Score of C and Momentum Score of A produce a VGM Score of B. The A Momentum Score reflects favorable price and estimate-revision characteristics, while the C Growth Score keeps the broader profile mixed. Zacks Style Scores are designed to complement the Zacks Rank, and a #3 ranking can still be held when the overall setup remains acceptable. The combination supports patience rather than chasing the shares at a premium.

You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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