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About Iqvia
Specialized analytics is the main game and Iqvia is the main name.
Well, I sort of lied, as while analytics is a major part of Durham, North Carolina-headquartered Iqvia’s business, it is also in the business(es) of providing broader technology solutions and clinical research services for the life sciences industry.
In gaining more familiarity with the company, its primary business segments and revenue streams include its clinical research services, where the company conducts all of the critical phases of official clinical trials on the behalf of biopharmaceuticals and biotechnology companies, along with generating sales from its voluminous healthcare database, containing clinical research data, real-world data such as medical and institutional claims, detailed data from physician practices, specifics on oncology research like cancer diagnoses and treatments, along with treasured specialty data relating to genomics, biomedical data, and hospital data, among others. The way in which Iqvia monetizes such data is through providing insights and relevant advice to pharmaceutical companies, healthcare providers, and even healthcare payers (i.e., governmental, commercial, and private). Other ways include aiding pharma companies in employing data to better patient recruitment, market research and forecasting services for the aforementioned parties, along with also developing tailor-made software packages for these parties that help them better analyze data and improve decisions and outcomes moving forward, also generating sales through licensing out data sets for others in the context of research and development (R&D).
Iqvia can be thought of as being in the business of helping healthcare companies be better at taking care of their business, as the company also offers a host of consulting services.
When considering some of the general reasons to be bullish and also bearish on the outlook of the company and its stock (as investors, we must not focus much, if at all on the present, but put all our eggs in the basket of the future), on the bull side of things, Iqvia is one of the largest contract research organizations (CROs) in the world, lending itself some impressive scale and relative pricing power, and it most certainly doesn’t hurt that it houses a vast amount of healthcare data, giving itself a marked competitive advantage in being able to serve a wide range of customers and provide them definitively valuable insights. In being a little more forward-looking on this front, the company’s management team is in the early innings of decentralizing its trial and research divisions, with the intent of creating a more cost-effective and efficient clinical study network. The last thing I’ll mention before diving into some of the sour after this sweet is that, if you couldn’t really tell already, Iqvia has a wide base of revenue streams, but in a concentrated fashion, focusing only on serving those within the healthcare sector, which certainly ticks a box on my prospective investment checklist.
Some more bearish factors to consider with Iqvia include its relative economic sensitivities with respect to working with other biotechnology and pharmaceutical firms. What I’m saying here is that when economic conditions tighten and these companies have to cut back on some research and development (R&D) spending, this means less clinical trials and analytics to be done, which subsequently means less business for Iqvia. Additionally, this company isn’t the only CRO in town, and it goes up against some fairly stiff competition, including the likes of Optum (a subsidiary of UnitedHealth Group), Medidata, Syneos Health, Parexel, as well as Labcorp Drug Development, you guessed it, a current subsidiary of diagnostics behemoth LabCorp.
Right before jumping into this company’s financials headfirst, I’ll also briefly outline the company and its current and more than likely accurate forward-looking relationship with the Fed and liquidity. Mainly, rates coming down is a general positive for this company, and although I think that the Fed will have to pivot sooner rather than later and begin raising rates incrementally given persistent inflationary pressures, next to full employment, and other factors making the economy run a bit hot, on top of President Trump having a second term, focusing on buildouts and initiatives that will probably end up making the economy run even hotter, higher rates should be in order and while higher rates would likely dampen R&D spend across its client base, there’s a bit of a hedge here in that pharmaceuticals and therapeutics enterprises still have to innovate and get drugs out onto the market in order to survive, thus the continued necessity for Iqvia and its services, perhaps just not at as frequent of a rate.
The last point I’ll make is that since biotech has proven itself to be such a disruptive and bustling sector, another liquidity factor to be accounted for is that the smaller shops simply trying to build some operations and get a glimpse of hope of getting a new drug out onto the market at some point require a lot of funding, and if interest rates presumably rise, funding might dry up, thus making it more challenging for such shops to survive, also putting a potential dent in Iqvia’s sales.
Still, it’s not hard for me to imagine periodic dips, but it is challenging for me to imagine plunges with Iqvia.
Okay, I can feel your eyes glazing over while mine remain wide open, so let’s find out more about the company’s financials in hopes of unveiling whether or not this company’s stock (NYSE: IQV) is worth investigating further and pondering a potential investment in for today, tomorrow, and the next day, and the, well, yeah, you see where I’m going.
Iqvia’s stock financials
Iqvia Holdings has a market capitalization of $35.30 billion, an associated stock price of $194.38, a price-to-earnings (P/E) ratio of 25.50 and not a dividend yield in sight, which is all fine by me since this company seems to be constantly innovating and innovating isn’t cheap, especially when you’re as large and in charge as this CRO, healthcare consultant, and data analytics enterprise.
When it comes to the company’s reported price-to-earnings ratio, its prevailing stock price in relation to its valuation initially appears to be on the higher end, which is an unnecessarily fancy way of saying that this company’s stock seems to be mildly overvalued, but emphasis on “mildly,” as if there happen to be enough tangible and objective reasons to be bullish on the company’s stock moving forward, perhaps shares of Iqvia all of the sudden don’t look that expensive anymore.
In learning more about this company’s true value, Iqvia’s executive team is in charge of $26.6 billion in terms of total assets and $20.5 billion in terms of total liabilities, demonstrating a strong cash position of just under $1.5 billion at the end of 2023, giving Iqvia a solid liquidity buffer, and while it can be noted that the company has a somewhat elevated debt-to-equity ratio of 194.9%, Iqvia can tend to this over time with the help of its fortified order backlog, maintaining an industry-leading backlog of more than $30 billion in its R&DS (the added “S” standing for services) segment, allowing it to generate more cash flow to sufficiently tend to these debts but also, in a dire yet practical case, refinance its debt on more favorable terms, again, if need be.
Onto the company’s income statement, Iqvia’s revenues between 2019 and 2023 have been steadily growing year-over-year (YOY), reported at year-end 2019 as just over $11 billion, $11.3 billion in 2020, $13.8 billion in 2021, $14.4 billion in 2022, and a smidge under $15 billion in its latest annual report in 2023. Upon conducting some more research, I found that Iqvia’s recent annual revenues have been growing as a result of a few different factors, including consistent, steady growth in both its analytics/software division and R&DS (i.e., performance of clinical trials for biotech and pharmaceutical companies) segment, reporting growth rates of 2% and 6% in 2023, respectively. Additionally, it isn’t all too difficult to piece together why the company’s revenues experienced a higher-than-average bump from 2020 to 2021, as with all of the major pharmaceuticals trying to get a COVID treatment out onto the market as expeditiously as possible, who better than Iqvia to help them run their trials and farm out data to these companies to help them in their fevered drug development?
In looking towards the future, the company’s strong backlog leads me to believe that this steady annualized revenue growth isn’t going to be over anytime soon, not to mention the robust bookings numbers the company’s been reporting, such as a book-to-bill ratio of 1.27 in the second quarter of 2024, meaning that for every $1.00 of services billed, Iqvia received $1.27 in new orders, generating more new business than it is currently delivering.
As it relates to the company’s cash flow statement, Iqvia’s total cash from operations throughout the same time period would be best categorized as stable-to-growing, ranging between a relative low of $1.4 billion in 2019 and a relative high of $2.9 billion in 2021 (this high making sense given the my previous COVID commentary), with subsequent and expected stabilization occurring in the following years, as the COVID-induced tailwind became a mere breeze and operations across the pharmaceutical and biotechnology sectors came back down to more normal levels.
Still, it is nice to find that Iqvia has been more recently able to generate more cash from its operations, largely due to its revenues remaining strong with also some added operational efficiency thrown into the mix.
Iqvia’s stock fundamentals
Regarding the company’s net profit margin, Iqvia’s is listed (on Charles Schwab’s platform) as 9.21%, and while without any sort of preconceived notion as to what it “should” be, I did a little research and found that it is actually a pretty competitive margin, as the average net profit margin for the Medical Laboratories industry is displayed as 5.69%, and while I haven’t actually done much of this type of public examination before, I ended up also finding that the company itself has been improving its net profit margin in recent quarters. For example, the company reported a net profit margin of 7.51% in Q3 2023 and it has since increased to the aforementioned 9.21%, which isn’t a trivial accomplishment by any means.
Still, I think for any company, especially at this juncture, it is important to note that with interest rates being at a sort of potential inflection point (i.e., I, among a few other investors think that rates are going to have to go up given the current inflation stickiness and the incoming growth and heated economy to be tacked on by President Trump, among other factors such as low unemployment and growing debt:GDP), and if I’m right and rates turn back up again, this company’s cost of borrowing is going to rise, unequivocally dinging the company’s net profit margin.
Should you buy Iqvia stock?
Putting all of the numbers to the side, in the context of where the world of medicine (and the world in general) is headed, I am a fan of Iqvia and its businesses.
With plenty of growth drivers in the chamber and on the horizon, its strong balance sheet and backlog, steadily expanding annual revenues and corresponding cash flows, and its upper-tier net profit margin with respect to its peers, and despite its shares being slightly above the commonly held price-to-earnings ratio benchmark, I think it will compensate sufficiently through future growth both internally but moreover through the vast and continuously expanding healthcare market, and the aging populations globally.
Therefore, a “buy” rating is in order.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
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