Shares of INC Research Holdings Inc. (INCR) reached a new 52-week high of $39.72 on Jun 19 and closed a tad bit lower at $39.65. This represents a strong one-year return of approximately 93.51%, better than the S&P 500’s return of 7.51% over the same period.
The bullish trend reflects increasing backlog in fast growing therapeutic areas and a diversified customer base. This Zacks Rank #1 (Strong Buy) stock has a market cap of $1.83 billion and a long-term expected earnings growth rate of 16.33%.
Growth Catalysts
INC Research is a contract research organization providing clinical development services (Phase 1 to 4) to biopharmaceutical and medical device industries. The company focuses on fast growing therapeutic areas of Central Nervous System (CNS), oncology and other complex diseases. These represented 67% of the company’s total backlog as of Mar 31, 2015.
INC Research’s diversified customer base is another growth catalyst in our view. The company has more than 300 customers and has served 19 of the top 20 bio-pharma companies in 2014. In the first quarter of 2015, the company’s top 5 customers accounted for 36% of its revenues, while top 10 represented 49%.
INC Research recently completed its secondary public offering and repurchased shares worth $150 million. The company also refinanced its existing credit facility by entering into a new $675 million senior secured credit facility.
The share buyback is expected to boost its bottom line in 2015. INC Research raised its fiscal 2015 adjusted earnings guidance to $1.45 to $1.57 per share from the previous guided range of $1.40 to $1.52 per share. However, the company reiterated its net service revenue guidance at $880–$905 million.
We believe that INC Research’s strong backlog of $1.6 billion at the end of first-quarter 2015 will support its top-line growth in 2015 and beyond.
Estimate Revisions
The Zacks Consensus Estimate for 2015 increased by a penny to $1.51 over the last 30 days. The 2016 estimates also climbed up by the same magnitude to $1.76 over the same time frame.
Stocks to Consider
Better-ranked stocks are Masimo Corp MASI, Cancer Genetics CGIX and AMN Healthcare AHS. Masimo sports a Zacks Rank #1 (Strong Buy), while Cancer Genetics and AMN Healthcare carry a Zacks Rank #2 (Buy).
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