Was Making Its Move

Biotech oustourcer Parexel (PRXL) broke out on high volume after it reported profits last month, but just as the stock started to make a move higher the stock market went into a wicked correction and brought almost everything down — including PRXL.

Parexel does clinical research and other services for companies developing drugs, including Biotech companies. Biotech’s are hot right now as many companies have developed profitable drugs, and have the resources to send money to other companies to do the clinical research for them. 

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One Year Chart

PRXL’s profits jumped 22% last qtr, but sales only increased 2%. That’s not much sales growth, and it’s been an annual norm. In 2014 sales were $1.9 billion, in 2015 (fiscal year just ended June 30th) sales were $2 billion. Next year’s estimate is for $2.2 billion. That’s not much growth.

PRXL is expected to grow profits 17% a yer long-term, and has grown them 22% a year the last decade. When I did these charts on 8/17 the P/E was 21 which is fair.

Fair Value

PRXL has had an average median P/E of 24 the past ten years, and I feel that’s fair right now. My Fair Value is $77 per share. The stock is selling at $64 today, implying 20% upside to its Fair Value, but to be honest a lot of stocks are on sale as we are in a wicked stock market correction.

Sharek’s Take

Parexel is a good buy at this time, as many stocks are, and the stock was making its move before this correction so it may resume its upward trend when the market turns back up. The stock also has 20% upside to my Fair Value, which is good. What I failed to mention is PRXL has let me down in the past, as I owned it in 2008 then sold it after it dropped hard when the company warned revenue wouldn’t hit expectations. Still, that was almost a decade ago and the stock’s much higher now (but didn’t get back to my original purchase price for 4 years). For now PRXL is a good stock that I can see myself buying into, but with the market in a correction I’ll keep PRXL on the radar for now.