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KeyBanc: Iqvia Holdings' Valuation Might Be Overheated

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November 13, 2017 8:41 am
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Iqvia Holdings Inc (NYSE:Q), formerly known as Quintiles, merged with IMS Health last year to combine its data assets and tools to better compete in the post-Cures Act environment.

The Analyst

KeyBanc Capital Markets' Donald Hooker downgraded Iqvia's stock rating from Overweight to Sector Weight with no assigned price target. Keybanc's previous price target was $100.

The Thesis

Iqvia's business model is differentiated and well-positioned to operate in the market at a time when there is a "concerted effort" by regulatory bodies across the world to improve the drug development process, Hooker said in the downgrade note. (See Hooker's track record here.) 

Iqvia is able to combine the data assets of the legacy IMS Health business to improve the clinical trial feasibility analysis during the RFP process, the analyst said. 

Looking forward, the company should be able to demonstrate a consolidated organic revenue growth profile of 6 to 7 percent and grow its EBITDA by 9 to 10 percent in both 2018 and 2019, Hooker said. The stock is trading at 14x 2018 EBITDA, which not only represents a premium to the group average of 12.8x, but also assumes a 25 percent multiple expansion this year, the analyst said. 

Iqvia's balance leverage of 3.8x (net debt-to-R4Q EBITDA) is above the average debt ratio of other publicly traded CROs of 1.8x, Hooker said. 

Price Action

Shares of Iqvia have gained 36 percent since the start of 2017 and 145 percent over the past five years.

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