Credit Suisse Initiates Medpace At Outperform, Says Co. Should Outgrow Industry

Credit Suisse has started coverage of Medpace Holdings Inc (NASDAQ: MEDP) with an Outperform rating, saying the contract research organization should benefit from a strong fundamental backdrop while having a competitive advantage due to its scientifically-driven full-service approach.

The brokerage set a price target of $35, which represents a potential upside of 14 percent over Friday's close.

"It should grow ahead of the industry and more profitably without meaningful capital requirements, supporting double-digit revenue and EPS growth over the long term," analyst Erin Wilson wrote in a note.

Related Link: UBS Initiates Medpace At Buy, Says Company Stands Out In Crowded Room

While the company conducts clinical trials across all major therapeutic categories, its areas of strength include cardiology, metabolic diseases, oncology, endocrinology, CNS, anti-viral and anti-infective (AVAI). The company generates 85 percent of its revenue from small and mid-size biotech customers.

Wilson sees Medpace's industry-leading revenue growth and superior profit profile (30 percent EBITDA margin vs. peer average of about 20 percent) as sustainable, given strict adherence to its highly cost-efficient, full-service operating model.

Meanwhile, the analyst estimates the overall CRO market at $29 billion, rising 6–8 percent annually, a trajectory Medpace should consistently exceed over the longer term. Wilson projects that 41 percent of clinical development is outsourced, a metric is expected to rise to 50 percent by 2020.

Wilson expects EPS of $1.47 on revenue of $367 million for 2016, and EPS of $1.63 on revenue of $414.6 million for 2017.

At time of writing, shares of Medpace fell 3.85 percent to $29.52.

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