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4:19:38 PM EDT: $247.15 -3.26 (-1.30%)
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A Little Known Biotech Marvel


Fundamentals  image

##Date##31 Aug 2015

The Best Biotech news in the world. Free. Forever. Period.

ICON (ICLR) is a truly remarkable firm inside the bio/pharma sector, is borderline recession proof, and has seen its stock price rise 56% in the last year and nearly 20% in the last three-months. It's a contract research firm that provides clinical trial services for all phases of FDA trials to help biotechs, pharmas and even medical device companies bring their products to market more quickly. Much like the steel companies during the railroad stock boom nearly a century ago, it's often times the companies that provide the core machinery behind an industry that are truly the most compelling. Illumina is another such company and you can read about it here: Why Illumina Is a Marvel.

If we look further and scan the entire biotech and phrama space for all companies under $50 billion in market cap, ICLR has the single highest fundamental rating of all of them. Here's a snapshot of the scan results.

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In its latest earnings release on July 28th, 2015, the stock popped higher. While net income (after tax profit) missed guidance, the rest of the news was very good. The company expanded its already very high margins and did grow EPS nearly 45%. More importantly, however, the company expects that the up-tick in margins will be the "new normal" and it raised 2015 earnings guidance by 8%. For those of you that like stock buybacks, the company approved a further $400 million share repurchase (Source: The Motley Fool).

ICLR has seen revenue, operating margins, net income and free cash flow each break all-time highs in the most recent trailing-twelve-month period.

➜ ICLR generates $1.21 in revenue for every $1 in expense, which is very high and considerably above the sector average of $0.70.

Gottlieb Risk Factor  image

ICLR has elevated stock price movement potential over the next 30-days (movement up or down). Although several proprietary factors affect the risk rating, in particular for ICLR some of the items driving the rating are:
↳  A large absolute stock return over the last 3-months (+19.2%).

    The stock price range reflected by the option market over the next 30-days is ($70.50, $84.10).

Technicals   |   Support: 74.27   |   Resistance: 80.73    image

Golden Cross Alert: The 50-day MA is now above the 200-day MA.
Swing Golden Cross Alert: The short-term 10 day MA is now above the 50 day MA.

ICLR has a four bull (high rated) technical rating because it's trading above both its 50- and 200-day moving averages. We do note that the stock is trading below the short-term 10-day moving average.

I remind all readers that a report just like this one is available for any company for free on CMLviz.com. No e-mail. No login. Free. Forever. Period.

Let's look at the core elements that drive the company's fundamental rating.

Fundamentals Rating Summary


Stock Returns and Chart

ICLR is up +19.2% over the last three months and up +12.0% over the last six months. The stock price is up +56.0% over the last year.

Before we dig into the fundamental trends that drive the rating, let's look at a two-year stock chart with regression channel and 10-day momentum (on the bottom).
Click here to interact with this stock chart

Now let's examine the visualizations of the critical financial measures.


Revenue (TTM US$ Millions) 1,5551,4111,237image

Revenue (TTM) is trending higher meaning that it has increased for at least five consecutive quarters (in this case it has been about 25 consecutive quarters). Revenue is up 10.2% year-over-year and 25.7% over the last two-years.

What do all these numbers mean?
ICLR's fundamental rating benefited these results:
1. The one-year change was positive (but no extra points were given for a large percentage increase).
2. The two-year change was positive.
Finally, the up trend (consecutive quarters) in revenue benefited the fundamental (star) rating.

Let's look at Revenue (TTM US$ Millions) in the chart below.

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Operating Revenues/Operating Expense

Operating revenue over operating expense simply shows us how much revenue (in dollars) is generated for every dollar of expense. The ratio must be (at a minimum) above 1.0 in order for a company to turn an operating profit. For the latest quarter ICLR showed a ratio of 1.21. It's very rare that operating margins increase consecutively for several periods, but ICLR is that rare case, seeing operating revenue over expense rise for an astonishing 18 consecutive quarters. Assets are also at an all-time high to over $1.6 billion.

What do all these numbers mean?
A year ago Operating Revenues/Operating Expense was 1.15. In the last year we can see operating margins are increasing and are also currently greater than 1.0 (the critical level).

ICLR's fundamental rating was affected from the operating margin numbers in two ways:
1. The current value is above 1.0 (the firm generates an operating profit).
2. The one-year change was positive (raises the rating).
Finally, the up trend (consecutive quarters) in operating margin benefited the fundamental rating.

Let's look at Operating Revenues/Operating Expense in the chart below with the total assets in the orange line.

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Net Income (TTM US$ Millions) 21013880image

If revenue and operating margins are breaking all-time highs, it's almost a certainty that net income will be as well. Not surprisingly, ICLR has seen net income explode over the last few years, up 52% year-over year and 160% over the last two-years. After tax profits now sit at an all-time high of $210 million in the trailing-twelve-months and the metric has risen for 15 consecutive quarters.

In our next chart we plot Net Income (TTM US$ Millions) in the blue bars and the quarterly results in the gold line. Note the rising bars from a year ago (four quarters ago).

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Summary I wrote it about Illumina and I will write it again for ICLR; the company is simply a marvel. It's revenue, earnings, margins and free cash flows are all at all-time highs, the company is guiding upwards and its business model is significantly less risky than a stand alone firm looking to get new drugs (or devices) approved by the FDA. It's a powerhouse in the industry yet still boasts a rather humble $4.6 billion market cap which is just three times sales (Price to Sales = 3). In the sector of bio/pharma, for firms under $50 billion in market cap, ICLR simply has the best fundamentals. And that's it.

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