Medpace Holdings Inc (MEDP, Financial) recently experienced a day's loss of -3.74%, yet it has seen a 3-month gain of 19.19%. With an Earnings Per Share (EPS) of 8.37, one might wonder if the stock is modestly undervalued. This article aims to answer that very question through an in-depth valuation analysis of Medpace Holdings. We invite you to read on and gain valuable insights into the company's financial performance and intrinsic value.
Medpace Holdings Inc, a late-stage contract research organization (CRO), provides comprehensive drug development and clinical trial services to small and midsized biotechnology, pharmaceutical, and medical device firms. With over 5,400 employees across 40 countries, Medpace has been offering its services for more than 30 years. Its stock is currently priced at $262.89 per share, with a market cap of $8 billion. In comparison, the GF Value, an estimation of its fair value, stands at $307.48, suggesting that the stock may be undervalued.
Understanding the GF Value
The GF Value is an exclusive measure of a stock's intrinsic value, calculated based on historical trading multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line provides an overview of 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, its future return will likely be higher.
According to GuruFocus Value calculation, Medpace Holdings (MEDP, Financial) appears to be modestly undervalued. This means that the long-term return of its stock is likely to be higher than its business growth.
Evaluating Financial Strength
Investing in companies with poor financial strength carry a higher risk of permanent loss. Medpace Holdings has a cash-to-debt ratio of 0.2, which is lower than 83.41% of 229 companies in the Medical Diagnostics & Research industry. However, its overall financial strength is 7 out of 10, indicating fair financial health.
Profitability and Growth
Consistent profitability over the long term reduces investment risk. Medpace Holdings has been profitable 8 out of the past 10 years, with a revenue of $1.70 billion and an operating margin of 19.06%, ranking better than 83.84% of its industry peers. Its profitability rank is 8 out of 10, indicating strong profitability.
Fast, profitable growth creates more value for shareholders. Medpace Holdings' 3-year average annual revenue growth is 23.7%, ranking better than 74.63% of its industry peers. Its 3-year average EBITDA growth rate is 30.7%, ranking better than 73.54% in its industry.
Comparing ROIC and WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is a useful way to evaluate its profitability. Medpace Holdings' ROIC is 16.06 while its WACC stands at 12.6, indicating that the company is likely creating value for its shareholders.
In conclusion, Medpace Holdings (MEDP, Financial) appears to be modestly undervalued. The company's financial condition is fair, its profitability is strong, and its growth ranks better than most of its industry peers. For more detailed financials of Medpace Holdings, check out its 30-Year Financials here.
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