We came across a bullish thesis on Medpace Holdings, Inc. (MEDP) on The LongView’s Substack by Matas Baliukonis. In this article, we will summarize the bulls’ thesis on MEDP. MEDP Technologies, Inc. share was trading at $361.95 as of Sept 23rd. MEDP’s trailing and forward P/E were 34.02 and 27.40 according to Yahoo Finance.
A biopharmaceutical expert reviewing Phase II/III clinical trials of a new therapy for ALS.
Medpace is a contract research organization founded in the year 1992 and led by Founder/CEO Dr. August Troendle. Over the years Medpace has built a strong reputation and trust within the industry by offering a variety of services end-to-end clinical development support across various therapeutic areas such as oncology, metabolism, cardiology, and nervous system. Medspace fills a much-needed gap in the market wherein it helps smaller companies manage the drug development process, which can take 10-15 years and cost over $2 billion.
Medspace has global expertise as it operates in 42 countries and provides regional insights for successful drug launches, we can say that Medspace has a robust business model as it has a diverse customer base to whom it charges fees upfront thus leading to a cash conversion rate above 100%. There are overwhelming switching costs once a company has invested billions and years into a drug development process thus the likelihood of switching between CROs is extremely low thus once Medpace gets a contract they are very likely to stick with them.
Going forward we expect the company to grow due to a rise in demand for Medpace’s services as there has been an increase in the complexity of the drug development clinical trials. We also expect the company to increase its market share by around 5% due to the reputation it has as well as the variety of services it offers. As the number of contracts, Medspace secures increases we can see a reduction in the per-client cost which will increase the margins and profitability of the company. Incorporating these catalysts and expectations in our forecast we expect a potential return CAGR OF 12.72% per year.
Thus in conclusion Medpace can be considered a compelling investment opportunity in the biotech sector despite being slightly overvalued as we have confidence in management and efficient operations the company has.
Medpace Holdings, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 37 hedge fund portfolios held MEDP at the end of the second quarter which was 40 in the previous quarter. While we acknowledge the risk and potential of MEDP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MEDP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.