A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
One such stock is IQVIA Holdings Inc. IQV), which has gained 50.3% in the past year, outperforming the 26.3% rally of the industry it belongs to and 10% rise of the Zacks S&P 500 composite.
It has an expected long-term (three to five years) earnings per share growth rate of 14%. Moreover, earnings are expected to register 14.4% growth in 2019 and 14.7% growth in 2020.
However, the company faces its share of headwinds. A high debt laden balance sheet may limit its future expansion and worsen its risk profile. International presence exposes the company to foreign currency exchange rate fluctuations. In spite of these headwinds, we believe that the company has enough positives that justify the stock’s retention in investors’ portfolio.
Factors Driving IQVIA Holdings
Solid Technological Suite and Strategic Collaborations
IQVIA Holdings looks strong on the back of its technological suite. The company offers an extensive range of technology solutions in the form of cloud-based applications and related services. The company’s Software as a Service (“SaaS”) solution supports a vast range of clinical and commercial processes.
The company secured major deals for its tech offerings from new and old clients in 2018. Its strategic collaborations include an agreement with Roche for the deployment and usage of IQVIA commercial technologies globally; partnership with Genomics England to build a real-world research platform, which integrates clinical and de-identified genomics data; and a technology deal with Theramex (a global pharmaceutical company dedicated to women’s health).
Launch of IQVIA Biotech for serving small biotech and biopharma companies through integrated clinical and commercial solutions, two new site portal technology capabilities to streamline clinical trial communications, a SaaS eConsent tool for use in clinical trials and development of SaaS safety platform, aimed at lowering cost and complexity of pharmacovigilance and enhancing organization’s focus on patient safety are the other major positives.
Growth Opportunities From Emerging Markets
IQVIA Holdings serves the life sciences industry (a major part of the global healthcare system) with the help of advanced analytics, technology solutions and contract research services. The company’s vast geographic presence should act as a boon. IQVIA Institute projects spending on pharmaceuticals in emerging markets to witness compound annual growth rate (CAGR) of 5-8% through 2023.
The company expects multiple acquisition opportunities across the industry. Life sciences organizations are expected to commercialize their operations in emerging markets just as they did in the developed markets. This growing presence in emerging markets like Asia-Pacific and Africa will provide more growth opportunities for IQVIA Holdings in the life sciences industry.
We are impressed with IQVIA Holdings’ consistent efforts to reward its shareholders in the form of share repurchases. In 2018, IQVIA Holdings repurchased shares worth $1.41 billion. On Feb 13, 2019, the company’s board of directors approved a $2.0 billion increase its share repurchase authorization. In 2017, 2016 and 2015, IQVIA Holdings repurchased shares worth $2.62 billion, $1.09 billion and $516 million, respectively. Such moves indicate the company’s commitment to create value for shareholders and underline its confidence in its business. These shareholder-friendly initiatives instill investors’ confidence in the stock.
Zacks Rank & Stocks to Consider
IQVIA Holdings currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
A few better-ranked stocks in the broader Zacks Business Services sector are Robert Half RHI, Automatic Data Processing ADP and Insperity NSP. While Robert Half and Automatic Data Processing carry a Zacks Rank #2 (Buy), Insperity sports a Zacks Rank #1. Long-term expected EPS (three to five years) growth rate for Robert Half, Automatic Data Processing and Insperity is 8.4%, 13% and 18%, respectively.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, wouldn't you like to know about our 10 finest buy-and-holds for the year?
From more than 4,000 companies covered by the Zacks Rank, these 10 were picked by a process that consistently beats the market. Even during 2018 while the market dropped -5.2%, our Top 10s were up well into double-digits. And during bullish 2012 – 2017, they soared far above the market's +126.3%, reaching +181.9%.
This year, the portfolio features a player that thrives on volatility, an AI comer, and a dynamic tech company that helps doctors deliver better patient outcomes at lower costs.
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