Standing out among the Street's worst performers today is ICON, a biotechnology company whose shares slumped -3.2% to a price of $188.73, 8.59% below its average analyst target price of $206.47.
The average analyst rating for the stock is buy. ICLR lagged the S&P 500 index by -3.0% so far today and by -56.3% over the last year, returning -39.7%.
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 company is categorized within the healthcare sector. The catalysts that drive valuations in this sector are complex. From demographics, regulations, scientific breakthroughs, to the emergence of new diseases, healthcare companies see their prices swing on the basis of a variety of factors.
ICON's trailing 12 month P/E ratio is 19.4, based on its trailing EPS of $9.71. The company has a forward P/E ratio of 13.2 according to its forward EPS of $15.07 -- which is an estimate of what its earnings will look like in the next quarter. As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US health care companies is 22.94, and the S&P 500 has an average of 29.3. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
To deepen our understanding of the company's finances, we should study the effect of its depreciation and capital expenditures on the company's bottom line. We can see the effect of these additional factors in ICON's free cash flow, which was $1.12 Billion as of its most recent annual report. This represents the amount of money that is available for reinvesting in the business, or for paying out to investors in the form of a dividend. With its strong cash flows, ICLR is in a position to do either -- which can encourage more investors to place their capital in the company. Over the last four years, the company's free cash flow has been growing at a rate of 20.0% and has on average been $699.37 Million.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (its share price divided by its book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method. Icon's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 1.54, but is still below the average P/B ratio of the Health Care sector, which stood at 3.19 as of the third quarter of 2024.
Since it has a Very low P/E ratio, a lower P/B ratio than its sector average, and generally positive cash flows with an upwards trend, ICON is likely fairly valued at today's prices. The company has mixed growth prospects because of an average PEG ratio and weak operating margins with a stable trend. We hope you enjoyed this overview of ICLR's fundamentals. Be sure to check the numbers for yourself, especially focusing on their trends over the last few years.
