Decoding Medpace Holdings (MEDP)'s Value: An In-Depth Valuation Analysis
Medpace Holdings Inc (NASDAQ:MEDP) has recently seen a daily gain of 15.37%, and a 3-month gain of 5.11%. With an Earnings Per Share (EPS) (EPS) of 8.37, the question arises: is the stock modestly undervalued? This article aims to answer this question through a detailed valuation analysis. Read on to gain insights into Medpace Holdings' financial performance and intrinsic value.
Introducing Medpace Holdings Inc (NASDAQ:MEDP)
Medpace Holdings is a late-stage contract research organization (CRO) offering full-service drug development and clinical trial services to small and midsized biotechnology, pharmaceutical, and medical device firms. With over 5,400 employees across 40 countries, the Cincinnati-based company also provides ancillary services such as bio-analytical laboratory services and imaging capabilities. Despite a stock price of $262.49, the GuruFocus Value (GF Value) of Medpace Holdings stands at $314.07, suggesting the stock may be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value. If the stock price is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
With a market cap of $8 billion, Medpace Holdings' current stock price of $262.49 per share suggests that the stock is modestly undervalued. As a result, the long-term return of its stock is likely to be higher than its business growth.
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Financial Strength
Investing in companies with weak financial strength carries a higher risk of permanent capital loss. Therefore, it's crucial to review a company's financial strength before deciding to buy its stock. Medpace Holdings has a cash-to-debt ratio of 0.2, which is worse than 82.82% of 227 companies in the Medical Diagnostics & Research industry. However, GuruFocus ranks Medpace Holdings' overall financial strength at 7 out of 10, indicating fair financial strength.
Profitability and Growth
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Medpace Holdings has been profitable 8 over the past 10 years. Over the past twelve months, the company had a revenue of $1.70 billion and an Earnings Per Share (EPS) of $8.37. Its operating margin is 19.06%, which ranks better than 83.77% of 228 companies in the Medical Diagnostics & Research industry. Overall, the profitability of Medpace Holdings is ranked 8 out of 10, indicating strong profitability.
Growth is a crucial factor in a company's valuation. The 3-year average annual revenue growth rate of Medpace Holdings is 23.7%, which ranks better than 75.25% of 202 companies in the Medical Diagnostics & Research industry. The 3-year average EBITDA growth rate is 30.7%, which ranks better than 74.05% of 185 companies in the same industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to assess its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders. For the past 12 months, Medpace Holdings' ROIC is 16.06, and its WACC is 13.11.
Conclusion
In conclusion, the stock of Medpace Holdings (NASDAQ:MEDP) shows every sign of being modestly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 74.05% of 185 companies in the Medical Diagnostics & Research industry. To learn more about Medpace Holdings stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
