Icon PLC Stock Is Estimated To Be Fairly Valued

GuruFocus.com
·4 min read

- By GF Value

The stock of Icon PLC (NAS:ICLR, 30-year Financials) gives every indication of being fairly valued, according to GuruFocus Value calculation. GuruFocus Value is GuruFocus' estimate of the fair value at which the stock should be traded. It is calculated based on the historical multiples that the stock has traded at, the past business growth and analyst estimates of future business performance. If the price of a stock is significantly above the GF Value Line, it is overvalued and its future return is likely to be poor. On the other hand, if it is significantly below the GF Value Line, its future return will likely be higher. At its current price of $183.32 per share and the market cap of $9.7 billion, Icon PLC stock shows every sign of being fairly valued. GF Value for Icon PLC is shown in the chart below.


Icon PLC Stock Is Estimated To Be Fairly Valued
Icon PLC Stock Is Estimated To Be Fairly Valued

Because Icon PLC is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth, which averaged 17.9% over the past three years and is estimated to grow 10.41% annually over the next three to five years.

Link: These companies may deliever higher future returns at reduced risk.

Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid permanent capital loss, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to to understand its financial strength. Icon PLC has a cash-to-debt ratio of 1.94, which which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research. The overall financial strength of Icon PLC is 7 out of 10, which indicates that the financial strength of Icon PLC is fair. This is the debt and cash of Icon PLC over the past years:

Icon PLC Stock Is Estimated To Be Fairly Valued
Icon PLC Stock Is Estimated To Be Fairly Valued

Companies that have been consistently profitable over the long term offer less risk for investors who may want to purchase shares. Higher profit margins usually dictate a better investment compared to a company with lower profit margins. Icon PLC has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $2.8 billion and earnings of $6.14 a share. Its operating margin is 14.64%, which ranks better than 69% of the companies in the industry of Medical Diagnostics & Research. Overall, the profitability of Icon PLC is ranked 9 out of 10, which indicates strong profitability. This is the revenue and net income of Icon PLC over the past years:

Icon PLC Stock Is Estimated To Be Fairly Valued
Icon PLC Stock Is Estimated To Be Fairly Valued

Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Likewise, if a company's revenue and earnings are declining, the value of the company will decrease. Icon PLC's 3-year average revenue growth rate is better than 78% of the companies in the industry of Medical Diagnostics & Research%. Icon PLC's 3-year average EBITDA growth rate is 5.6%, which ranks in the middle range of the companies in the industry of Medical Diagnostics & Research.

One can also evaluate a company's profitability by comparing its return on invested capital (ROIC) to its weighted average cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the return on invested capital exceeds the weighted average cost of capital, the company is likely creating value for its shareholders. During the past 12 months, Icon PLC's ROIC is 14.59 while its WACC came in at 5.11. The historical ROIC vs WACC comparison of Icon PLC is shown below:

Icon PLC Stock Is Estimated To Be Fairly Valued
Icon PLC Stock Is Estimated To Be Fairly Valued

To conclude, The stock of Icon PLC (NAS:ICLR, 30-year Financials) shows every sign of being fairly valued. The company's financial condition is fair and its profitability is strong. Its growth ranks in the middle range of the companies in the industry of Medical Diagnostics & Research. To learn more about Icon PLC stock, you can check out its 30-year Financials here. To find out the high quality companies that may deliever above average returns, please check out GuruFocus High Quality Low Capex Screener. This article first appeared on GuruFocus.

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