Fundamental Analysis of ICON (ICLR) Shares

ICON (ICLR) stock climbed 8.3 % this morning. According to our metrics, the company seems overvalued with mixed growth factors at today's prices.

ICON Public Limited Company, a clinical research organization, provides outsourced development and commercialization services in Ireland, rest of Europe, the United States, and internationally. The large-cap Healthcare company is based in Dublin, Ireland and has 40,500 full time employees.

ICLR Has a Higher P/E Ratio Than the Sector Average

Compared to the Healthcare sector's average of 13.21, ICON has a trailing twelve month price to earnings (P/E) ratio of 34.3 and an expected P/E ratio of 23.3. The P/E ratios are calculated by dividing the company's share price by its trailing 12 month of $6.35 or forward earnings per share of $9.37.

Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since ICON's P/E ratio is higher than its sector average of 13.21, we can deduce that the market is overvaluing the company's earnings.

ICON Is Fairly Valued in Terms of Expected Growth

Another factor pointing to ICON's value is its PEG ratio of 1.01. This is the stock's price to earnings ratio divided by its estimated earnings growth rate. If the resulting ratio is near or lower than 1 -- but higher than 0 -- its indicates that the company is faitly valued in terms of expected growth.

ICLR Has an Alarming P/B Ratio

The price to book (P/B) ratio of a company is a comparison of the company's market capitalization versus its net asset, or book value. A ratio lower than 1 tells you that the equity market is undervaluing the book value of the company's assets, and ratios higher than 1 tell you that the equity markets are overvaluing the company in terms of its assets.

Of course, a company is worth much more than its assets alone, so the focus on P/B ratio is mainly to enable investors to single out undervalued securities that offer a margin of safety. Since ICON's P/B ratio of 6.0 is higher than its sector average of 4.07, such a margin of safety does not exist for the stock.

ICLR Is Generating Cash

ICON has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of 41.8%, compared to 42.2% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of 42.6% and a coefficient of variability of 34.9%:

Date Reported Cash Flow from Operations ($ MM) Capital expenditures ($ MM) Free Cash Flow ($ MM) YoY Growth (%)
2021-12-31 829 -94 735 42.25
2020-12-31 568 -51 517 42.85
2019-12-31 413 -51 362 n/a

ICON's Margins Are Strong

If you buy a stock for the long run, you want the underlying business model to be profitable. Gross margins tell you how much profit the company generates compared to the cost of revenue, which is the cost directly related to providing ICON's goods and services. Operating margins, on the other hand, tell you how much of these profits the company keeps after you take overhead into account.

ICON's Gross Margins

Date Reported Revenue ($ MM) Cost of Revenue ($ MM) Gross Margins (%) YoY Growth (%)
2021-12-31 5,481 3,973 27.52 -5.82
2020-12-31 2,797 1,980 29.22 -1.42
2019-12-31 2,806 1,974 29.64 n/a

ICON's Operating Margins

Date Reported Total Revenue ($ MM) Operating Expenses ($ MM) Operating Margins (%) YoY Growth (%)
2021-12-31 5,481 900 11.09 -24.25
2020-12-31 2,797 408 14.64 -5.24
2019-12-31 2,806 398 15.45 n/a

ICON's cost of revenue is growing at a rate of 50.5% in contrast to 61.6% for operating expenses. Sales revenues, on the other hand, have experienced a 47.8% growth rate. As a result, the average gross margins growth is -3.6 and the average operating margins growth rate is -14.7, with coefficients of variability of 3.9% and 16.9% respectively.

ICON Benefits From Positive Market Signals

The market sentiment regarding ICON is overwhelmingly positive. The stock has an average rating of buy and target prices ranging from $295 to $215. ICLR is trading -16.01% away from its target price of $259.4. 1.6% of the company's shares are tied to short positions, and 99.3% of the shares are held by institutional investors.

Holder Shares Date Reported Percentage Value
Massachusetts Financial Services Co. 7,958,693 2022-06-29 10% $1,724,648,773
WCM Investment Management, LLC 6,171,668 2022-09-29 8% $1,134,229,145
Wellington Management Group, LLP 4,133,216 2022-06-29 5% $895,667,907
Boston Partners 2,946,362 2022-06-29 4% $638,476,645
American Century Companies, Inc. 2,736,805 2022-06-29 3% $593,065,643
Lazard Asset Management LLC 2,508,155 2022-06-29 3% $543,517,188
FMR, LLC 2,332,824 2022-06-29 3% $505,522,960
ClearBridge Investments, LLC 2,273,281 2022-06-29 3% $492,619,992
Ninety One UK Ltd 2,135,174 2022-06-29 3% $462,692,205
Comgest Global Investors S.A.S. 1,841,706 2022-06-29 2% $399,097,690
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.