What happened
Shares of Medpace Holdings (MEDP +1.62%), a clinical contract research organization (CRO) that supplies clinical development services to the biotechnology, pharmaceutical, and medical device industries, rose 41.5% this week, according to data from S&P Global Intelligence.
The stock closed last Friday at $157.14, then opened on Monday at $157.74. Shares rose sharply on Tuesday, and a day later hit their 52-week high at $235.72. They closed the week a little lower at $222.32. So far this year, shares are flat, but are up more than 27% the past three months.
So what
The driving force for the stock surge was the company's third-quarter earnings report, which it released Tuesday. Medpace reported $383.7 million in revenue for the quarter, up 29.8% year over year, while it had net income of $66 million, up 35.8% over the same period last year. It also reported $2.05 in earnings per share (EPS), compared to $1.29 in EPS in the same period a year ago.The report represented a bit of an earnings surprise to analysts, who had predicted EPS of $1.34.
NASDAQ: MEDP
Key Data Points
The company also raised its guidance for yearly revenue as well as for earnings before interest, taxes, depreciation, and amortization (EBITDA), net income, and EPS. The new revenue forecast now falls between $1.44 billion and $1.46 billion, with EBITDA between $302 million and $310 million, net income between $232 million and $236 million, and EPS between $6.88 and $7.
In addition, the company said that on the prior Friday it authorized share repurchases of up to $500 million. The only down note of the report came in the company's third-quarter earnings call, where CEO August Troendle said he expected growth to slow next year.
Roughly 77% of the company's business comes from smaller pharmaceutical or medical equipment companies that can't yet afford to have an in-house team to do clinical trials to bring their drugs or medical devices to market.
Now what
In the short term, investors may decide to take profits after the healthcare company hit its 52-week high this week. However, the long-term forecast may encourage more share growth. The company has had seven consecutive quarters of increased revenue. More companies, particularly smaller ones, are outsourcing the specialized work of research and trial functions that CROs such as Medpace perform. The company, in lieu of growing through acquisitions, has chosen to build its business organically.
