Stock (Symbol) |
ICON (ICLR) |
Stock Price |
$72 |
Sector |
| Healthcare |
Data is as of |
| January 9, 2016 |
Expected to Report |
| Feb 22 – Mar 1 |
Company Description |
 ICON public limited company (ICON) is an Ireland-based contract research organization (CRO), providing outsourced development services to the pharmaceutical, biotechnology and medical device industries. The Company is engaged in the strategic development, management and analysis of programs that support the various stages of the clinical development process, from compound selection to Phase I-IV clinical studies. ICON’s services include clinical trials management, biometric activities, consulting, imaging, contract staffing, informatics and laboratory services. Source: Thomson Financial |
Sharek’s Take |
 ICON (ICLR) could be swimming upstream is Hillary Clinton is elected President. Right now she’s ahead in the polls and has vowed to cut drug costs. ICON is a healthcare outsourcer that helps drug and biotech drug companies perform clinical trials and drug development. Drug companies are increasing spending at 2% to 3% per year, and if they have to cut costs, they could reduce ICON’s workload. ICON the company is doing good. Very good. The company generates lots of cash and has acquired one company in each of the past nine years in addition to buying back stock. Profits are expected to grow 19% in 2016, and the company has beaten the street the last 9 qtrs. But analysts just lowered ICLR’s estimated long-term growth rate from 20% to 15%. At 15x earnings this stock is a very good value for the long-term, I just think the political overhang is taking money out of the drug sector in general. |
One Year Chart |
 Last qtr ICON delivered 28% profit growth on a 3% gain in sales. The company usually grows profits faster than sales by increasing efficiency (operating margin was $18% in 2015 vs 14% in 2014) and buying back lots of stock. Estimates for the next 4 qtrs for profit growth are 24%, 21%, 18% and 14%. These numbers just increased a bit, which is good. 2015’s estimate also increased, from $4.69 to $4.72. Nice P/E of 15, but the Est. LTG just fell from 20% to 15%. ICON is based in Ireland, does 24% of business there and 40% in the U.S. |
Fair Value |
 I’m taking my Fair Value down from 20x earnings to 17x. That gives us Fair Values of $80 this year and $89 next year. I could be more optimistic, but the stock didn’t do much the past few weeks when the market was in rally mode. |
Bottom Line |
 ICON has had rough patches the past ten years, but has given investors a return of 20% a year overall. Right now I feel the momentum has left the drug sector and institutions are selling good stocks like ICLR as well. I like this stock, as its a solid value, but the political atmosphere isn’t good for ICON and if Clinton pinches drug companies they could pinch R&D. ICLR ranks 22nd of 37 stocks in the Growth Portfolio Power Rankings. I will sell the shares in the Aggressive Growth Portfolio and replace it with Home Depot (HD). |
Power Rankings |
Growth Stock Portfolio
22 of 37Aggressive Growth Portfolio N/AConservative Stock Portfolio N/A |
