Medpace Holdings is the IBD Stock Of The Day. Months after a bullish 2023 call sent MEDP stock soaring, shares are now on the cusp of multiple early buy points.
Medpace is among a group of companies that provide the backbone for research into new drugs and medical devices. About 85% of its revenue is tied to the biotech segment — an area that saw massive growth in early 2022, but has since faced a number of headwinds. So, Medpace shocked investors when it beat quarterly expectations, raised its full-year outlook and offered a strong 2023 outlook.
At the midpoint, Medpace expects 18% sales growth next year, UBS analyst John Sourbeer says.
"To us, the key question is 'How achievable is this growth rate?' " he said in a recent note to clients. "In a normal environment, we believe growth above 20% would be achievable, particularly given the company's focus on smaller/faster growing biotech companies. That said, given the headwinds for this segment of the market right now, in our view guidance needed to be below this level for 2023."
In the aftermath of the earnings report, MEDP stock rocketed as much as 49% over two days.
MEDP Stock: Multiple Potential Buy Points
Since then, shares have trended mostly sideways in a consolidation pattern. But if MEDP stock can overtake that previous high point, it will break out. Shares are trying to find support at their 50-day moving average, according to MarketSmith.com.
While the official buy point is 235.82, new and earlier entries could emerge in the coming days and weeks. Shares reversed from a downtrend Friday and ended the day up marginally to 206.
The next big catalyst for Medpace stock could be its fourth-quarter earnings report. Analysts expect Medpace to earn $1.86 per share, minus some items, on $386 million in sales. Earnings would rise almost 38% and sales would surge about 25%, according to FactSet.com.
It's also important to note, annual profits are growing. Last year, Medpace earned $4.81 per share. This year, MEDP stock analysts call for $6.97 per share, rocketing 45%. By 2026, analysts project Medpace earnings of $13.05 per share. Annual sales growth is on a similarly strong trajectory.
Highly Rated Medical Stock
Sourbeer, the UBS analyst, raised his price target on Medpace stock to 238 from 142, and upgraded shares to a neutral rating from sell.
"While we admit to being surprised by where it shook out, we believe the company has been seeing higher win rates with customers, which is one factor underpinning the revenue guidance," he said.
Medpace also has high rankings from IBD Digital. The strong earnings growth is reflected in the EPS Rating of 99, a perfect score for the metric that examines profitability. MEDP stock also has matching Composite and Relative Strength ratings of 96. This puts shares in the leading 4% of all stocks when it comes to fundamental and technical measures as well as 12-month performance.
Its stock ranks fifth on the IBD 50 list of elite growth stocks.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
