Why Medidata Solutions Shares Roared Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Medidata Solutions (NASDAQ: MDSO  ) , a cloud-based software solutions provider to the life sciences industry, advanced as much as 16% after reporting its third-quarter earnings results.

So what: For the quarter, Medidata Solutions reported record quarterly revenue of $70.9 million, an increase of 27% from the year-ago period, of which application service revenue (i.e., the recurring type) accounted for $57.9 million and was up 32% year over year. Profit for the quarter came in at an adjusted $0.40 per share, which was $0.07 better than Wall Street was expecting. Looking ahead, Medidata boosted its revenue forecast slightly to a range of $275.3 million to $276.8 million and guided adjusted non-GAAP net income to a range of $37.3 million to $38.3 million, or $1.38-$1.42 in EPS, which compares favorably to the consensus of $1.37.

Now what: This was definitely another solid quarter from Medidata. It is benefiting from the move toward all things digital in the health care industry and the need for life sciences companies to reduce expenses by becoming more efficient, which is what Medidata's cloud-based applications accomplish. But I can't help but think that Medidata's lofty expectations are already baked into its share price. Medidata is currently trading at 19 times book value, 12 times sales, and a frothy 73 times its fiscal 2014 projected EPS, all while its sales growth is expected to slow to just 21% next year. Based on these figures, I'd suggest passing on Medidata until the valuation makes a bit more sense.

This stock could dwarf Medidata's growth potential
The health care industry certain has its share of high fliers, but this incredible tech stock is growing twice as fast as Google and Facebook, and more than three times as fast as Amazon.com and Apple. Watch our jaw-dropping investor alert video today to find out why The Motley Fool's chief technology officer is putting $117,238 of his own money on the table, and why he's so confident this will be a huge winner in 2013 and beyond. Just click here to watch!


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

DocumentId: 2697199, ~/Articles/ArticleHandler.aspx, 4/16/2014 1:00:38 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement