Craig-Hallum has revised its price target for Simulations Plus (SLP, Financial), lowering it from $45 to $36. Despite maintaining a Buy rating, this adjustment follows the company's preliminary third-quarter results and updated guidance for fiscal year 2025. According to the firm, the company's services segment is facing macroeconomic pressures, leading to delays in contract initiations, slow progress in signing new agreements, and postponements in clinical trials. However, Simulations Plus' software division demonstrates resilience, benefiting from New Approach Methodologies, which place it in a favorable position within the expanding market of drug development. This suggests a promising investment opportunity for those looking to capitalize on the industry’s growth potential.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 4 analysts, the average target price for Simulations Plus Inc (SLP, Financial) is $36.25 with a high estimate of $41.00 and a low estimate of $28.00. The average target implies an upside of 80.80% from the current price of $20.05. More detailed estimate data can be found on the Simulations Plus Inc (SLP) Forecast page.
Based on the consensus recommendation from 6 brokerage firms, Simulations Plus Inc's (SLP, Financial) average brokerage recommendation is currently 1.7, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Simulations Plus Inc (SLP, Financial) in one year is $73.72, suggesting a upside of 267.68% from the current price of $20.05. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Simulations Plus Inc (SLP) Summary page.
SLP Key Business Developments
Release Date: April 03, 2025
- Total Revenue: Increased 23% year-over-year to $22.4 million.
- Organic Revenue Growth: 5% excluding contributions from ALI and MC business units.
- Diluted EPS: $0.15; Adjusted diluted EPS: $0.31.
- Adjusted EBITDA: $6.6 million, representing 29% of revenue.
- Software Revenue Growth: 16%, with software representing 60% of total revenue.
- Services Revenue Growth: 34%, with services representing 40% of total revenue.
- Gross Margin: Total gross margin at 59%; Software gross margin at 81%; Services gross margin at 25%.
- Net Income: $3.1 million, 14% of revenue.
- Cash and Short-term Investments: $21.4 million, with no debt.
- Software Customer Renewal Rate: 90% based on fees, 84% based on accounts.
- Backlog: $20.4 million, up 18% quarter-over-quarter.
- Effective Tax Rate: 12% for the quarter, expected to be 21%-23% for the fiscal year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total revenue increased by 23% year-over-year, with a 5% organic growth excluding contributions from new business units.
- Software revenue grew by 16%, driven by strong performance in the Quantitative Systems Pharmacology (QSP) business unit, which saw an 89% revenue surge.
- The company maintained a high software customer renewal rate of 90% based on fees, indicating strong customer retention.
- Simulations Plus Inc (SLP, Financial) ended the quarter with $21.4 million in cash and short-term investments, maintaining a strong financial position with no debt.
- The company reaffirmed its fiscal year 2025 guidance, expecting total revenue between $90 million to $93 million, indicating confidence in continued growth.
Negative Points
- Services revenue, although up 34%, was flat on an organic basis, with clients delaying project initiations to the second half of the year.
- Gross margin decreased to 59% from 72% in the prior-year quarter, primarily due to increased costs in software and services.
- Net income for the quarter decreased to $3.1 million from $4 million in the previous year, with diluted EPS dropping from $0.20 to $0.15.
- The renewal rate based on fees declined from 94% to 90%, impacted by a large customer renewal that was delayed until the third quarter.
- The operating environment remains challenging, with customers taking a cost-conscious approach to spending, affecting the pace of service project initiations.
