Icon PLC (ICLR) is a contract research organization or CRO. Pharmaceutical companies use CROs to handle clinical trials and often regulatory issues related to getting new drugs approved by the FDA and other national drug regulatory agencies. Icon is incorporated in Ireland. It is one a a few CROs a global business. Its largest customer is Pfizer, accounting for approximately 25% of revenue. This is a large concentration in one customer although Pfizer’s share of Icon’s revenues is decreasing. Also, Pfizer just agreed to a new 5 year contract.
Margins have been expanding but this expansion may soon slow significantly. The pharmaceutical industry and related businesses have suffered recently from bad press and some political risk. With an aging population in developed companies this industry does have positive demographics working for it.


Attached is a PDF version of an SSG generated using ToolKit and a PDF report from Equity Research Service. In addition an ITK file for an SSG import is attached. These files appear at the end of this post. The judgement calls and the rationale are as follows:

EPS growth rate – 12.5%. ValueLine does not cover ICLR. Recent growth has been disappointing at just under 6.5% From the Quarterly Trend Graph of ToolKit6 the trend has been downward averaging around 20%. The decrease seems to be slowing. Analysts average 5 year growth from ICLUBcentral’s Equity Research Service give a growth rate of 11.9%. With all the above information I chose a slighlty higher EPS growth rate than analysts.

Sales Growth Rate – The recent sales growth rate from the Equity Research Service is a disappointing 4.8%.Historical growth has been higher at 13%. My 7.5% figure was a reconciliation of multiple estimates. Future growth will come from demographic need for new drugs. The company will need to broaden its customer base though.

Projected High PE – The 10 year average high PE is near 27.9. Take Stock and the Equity Research Service showed the high PE is fairly volatile. The range for the 2 services is 27.7 – 34.4. Since this PE has been volatile and trending down recently, I chose the average of the most recent 4 years, 22.9

Projected Low PE – A similar analysis was done for the projected low PE, settling on 12.3.

Projected Low Price – Using trailing 12 months earnings of 4.45 and a projected low PE of 12.3 gives a projected low price of 54.7. This is a small company and therefore subject to more price volatility. Looking at a drop of 35% from its current price gave a projected low just below 50. I compromised a little for a low price of 50.7. This is partially due to the recent price drop.

My analysis gives an Upside/Downside ratio of 3.4, in the Buy range. This is contingent on the company stabilizing its current decline in sales and EPS growth. Over the long-term I believe demographic trends favor such a scenario but the company does need to capitalize on this trend.
Icon plc (ICLR) appeared as a selected stock in the May 2016 Small Cap Informer newsletter of ICLUBcentral. I own a position in ICLR in a family account.


ICLR-RAM-2016116.ITK (5kb) downloaded 3 time(s). ICON.pdf (46kb) downloaded 2 time(s). ICLR-11-7-2016ERS.pdf (135kb) downloaded 2 time(s).