Clinical Research and Chemistry Boost PRA Health

12/21/2017 5:00 am EST


Michael Cintolo

Vice President of Investments and Chief Analyst, Cabot Heritage Corporation

PRA Health (PRAH) is a North Carolina-based clinical research organization (CRO) that provides outsourced services to biotech and pharmaceutical companies, ranging from basic chemistry to clinical development, trial enrollment and design, notes growth stock expert Mike Cintolo, editor of Cabot Top Ten Trader.

The company is particularly strong in late-stage development services, where clients appreciate its ability to cut months off the timeline to drug approval. That can mean millions of extra dollars in revenue before drugs go off patent, which is part of why PRA Health’s growth is so robust.

The company has delivered double-digit revenue growth in each of the past 10 quarters, has been profitable for years, and beat Q3 expectations when it reported 28% revenue growth and EPS of $0.88, up 38% from a year ago.

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Following the results, management raised guidance, partially to reflect the closing of the Symphony Health acquisition. Analysts currently forecast 22% revenue growth in 2018 and EPS growth of 21% (to $4.01).

The Street likes that PRA Health has repeatedly landed lucrative strategic partnerships with large clients, and a recent win with Japan’s Takeda Pharmaceuticals to take over Takeda’s Pharmaceutical Data Services along with 60 employees, was just one more example. Analysts clearly like what they see, and recent initiations and institutional buying suggest the stock has more upside.

PRAH spent the first half of 2017 trending smoothly higher, then entered a three-month consolidation phase that lasted from July through September.

The stock broke out above 80 in early-October, but that move didn’t go far, setting up another tight consolidation. But PRAH’s recent rally to new highs, which came on many days of excellent volume, looks for real. You can buy some here or on dips.

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