Medpace currently trades at $610.21 and has been a dream stock for shareholders. It’s returned 238% since August 2021, more than tripling the S&P 500’s 70.1% gain. The company has also beaten the index over the past six months as its stock price is up 35.1% thanks to its solid quarterly results.
Is now still a good time to buy MEDP? Or are investors being too optimistic? Find out in our full research report, it’s free.
Why Does Medpace Spark Debate?
Founded in 1992 as a scientifically-driven alternative to traditional contract research organizations, Medpace (NASDAQ:MEDP) provides outsourced clinical trial management and research services to help pharmaceutical, biotechnology, and medical device companies develop new treatments.
Two Positive Attributes:
1. Core Business Firing on All Cylinders
In addition to reported revenue, organic revenue is a useful data point for analyzing Drug Development Inputs & Services companies. This metric gives visibility into Medpace’s core business because it excludes one-time events such as mergers, acquisitions, and divestitures along with foreign currency fluctuations - non-fundamental factors that can manipulate the income statement.
Over the last two years, Medpace’s organic revenue averaged 17.2% year-on-year growth. This performance was fantastic and shows it can expand quickly without relying on expensive (and risky) acquisitions. 
2. Increasing Free Cash Flow Margin Juices Financials
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.
As you can see below, Medpace’s margin expanded by 6 percentage points over the last five years. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability. Medpace’s free cash flow margin for the trailing 12 months was 25.4%.
One Reason to Be Careful:
Projected Revenue Growth Is Slim
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Medpace’s revenue to rise by 4.1%, a deceleration versus its 22% annualized growth for the past five years. This projection doesn’t excite us and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.
Final Judgment
Medpace’s positive characteristics outweigh the negatives, and with its shares topping the market in recent months, the stock trades at 33.3× forward P/E (or $610.21 per share). Is now the time to initiate a position? See for yourself in our full research report, it’s free.
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