IQVIA’s stock price has taken a beating over the past six months, shedding 22.2% of its value and falling to $190.42 per share. This may have investors wondering how to approach the situation.
Is there a buying opportunity in IQVIA, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why IQV doesn't excite us and a stock we'd rather own.
Why Is IQVIA Not Exciting?
Created from the 2016 merger of Quintiles (a clinical research organization) and IMS Health (a healthcare data specialist), IQVIA (NYSE:IQV) provides clinical research services, data analytics, and technology solutions to help pharmaceutical companies develop and market medications more effectively.
1. Weak Constant Currency Growth Points to Soft Demand
Investors interested in Drug Development Inputs & Services companies should track constant currency revenue in addition to reported revenue. This metric excludes currency movements, which are outside of IQVIA’s control and are not indicative of underlying demand.
Over the last two years, IQVIA’s constant currency revenue averaged 3.8% year-on-year growth. This performance slightly lagged the sector and suggests it might have to lower prices or invest in product improvements to accelerate growth, factors that can hinder near-term profitability. 
2. 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 IQVIA’s revenue to rise by 3.2%, close to its 3.4% annualized growth for the past two years. This projection is underwhelming and indicates its newer products and services will not catalyze better top-line performance yet.
3. Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
IQVIA historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 6.8%, somewhat low compared to the best healthcare companies that consistently pump out 20%+.
Final Judgment
IQVIA’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 16.2× forward price-to-earnings (or $190.42 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. Let us point you toward the most entrenched endpoint security platform on the market.
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