It’s the beautiful thing about Quality Investing. When you do your homework and you’ve found a wonderful company, the right time to sell is almost never. Why? Because in the long term, stock prices will always follow the evolution of the Owner’s Earnings (intrinsic value) of a company. Medpace Holdings Inc. (MEDP) is an example, explains Pieter Slegers, editor of Compounding Quality.

Here’s a brief overview of Medpace’s recently released Q1 results:

  • Revenue: $511 million (+17.7%)
  • Backlog of $2,907.1 million (+18.2%)
  • Net new business awards: $615.6 million --> Net book-to-bill ratio: 1.20x
  • GAAP Net income: $102.6 million ($3.20 per diluted share = +41% YoY)
  • Net income margin: 20.1% (versus 16.8% one year earlier)
  • Cash and cash equivalents: $407 million
  • No share repurchases last quarter
  • This (might) indicate that management thinks the stock is still quite expensive. It’s why we are not in a hurry to add to our position

As for its forecasts, the company projected revenue in 2024 of $2,150-$2,200 million (+14%-+16.7% YoY), GAAP Net Income of $347-$369 million, and diluted EPS of $10.79-$11.47.

Medpace Holdings Inc. (MEDP)
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In general, I am happy with the results Medpace reported.  It’s a beautiful company that keeps compounding at attractive rates.

We bought Medpace for $240 in October last year. This means our return on this company is more than 60%. Is the company still an attractive buy today? Let’s find out.

  • Forward PE: Medpace trades at a forward PE of 36.5x
  • Earnings Growth Model: expected yearly return of 13.1%
  • Reverse DCF: Medpace should grow its FCF by 13.2% per year to return 10% per year to shareholders

The conclusion here is that Medpace is a wonderful company at a fair price. We love to be an owner of the business and have no intention to sell at all.

Recommended Action: Buy MEDP

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