UBS Initiates Medpace Holdings At Buy, Says Company Stands Out In A Crowded Room

UBS said Medpace Holdings Inc MEDP, a contract research organization, is set to organically surpass the industry over the next four to five years. The firm started coverage with a Buy rating and $35 target price.

The brokerage said the company, which has strong organic growth and EBITDA margins, differentiates itself by providing full service and end-to-end approach across all therapeutic areas. This approach should allow the company to maintain high margins without affecting top-line growth and allow it to effectively compete with larger CROs.

"We forecast that increased CRO penetration, market share gains and conservative backlog policy will lead to growth ~2x the CRO industry," analyst Jonathan Groberg wrote in a note.

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Groberg noted investors are under-appreciating the ability of management to deliver consistent results, and out-of-the gate execution can drive valuation higher.

"We are positive on the outlook for the broader CRO industry, particularly in the small and mid-sized biopharma bucket which constitutes 85 percent of MEDP sales and is expected to grow 10 percent annually vs. 4–5 percent for the large pharma market," Groberg added.

The analyst expects EPS of $1.44 and $1.64 for 2016 and 2017, respectively.

Meanwhile, the $35 price target represents a potential return of 14 percent over Friday's close of $30.70.

At time of writing, Medpace was down 4.13 percent on the day, trading at $29.43.

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