01/05/2015 2:17 pm EST


Richard Moroney

Editor, Dow Theory Forecasts

Drug and medical device companies increasingly turn to this Top Pick to perform testing and research, explains small-cap specialist Richard Moroney in Upside.

That's because ICON (ICLR) can help shorten product development times, control costs, and better manage global clinical trials.

During the September quarter, new contract wins helped increase the business backlog to $3.5 billion, up 19% from a year earlier.

At 20-times estimated current-year earnings, ICON is not a steal. But that multiple is below the median of 21 for the health sector, and ICON's Value score of 61 implies solid upside potential.

Moreover, the stock's valuation seems more reasonable considering its projected growth trajectory. For full year 2014, ICON targets per-share earnings of $2.74 to $2.79, implying at least 55% growth.

For 2015, analysts project per-share earnings of $3.19, up 16% and above the median 13% growth projected for healthcare stocks. ICON, with an Overall score of 97, is a Best Buy.

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