The company is also active in the M&A market and trades with solid valuations.

Company Description

Medidata Solutions provides software services used by life science groups in clinical development.

Record-Setting Quarter

On May 10 Medidata reported first quarter results that included revenues of $40.8 million, an 8% increase. Gross margins were also on the rise and are now at 68%.

Coupling higher revenues with wider margins led to net income of $7.2 million, up $0.5 million. Earnings per share came out to $0.14, which was 3 cents lighter than expected.

Despite the miss analysts still raised estimates for the full-year. The Zacks Consensus Estimate for 2011 rose 3 cents, to $1.13. Next year's average projection is also up 3 cents, to $1.25. In 2010 Medidata earned $1.01 per share, putting expected growth rates at 12% this year and 11% in 2012.

M&A Activity

Medidata announced that it is set to acquire Clinical Force. The deal should close sometime in the third quarter and the financial aspect was not disclosed. Medidata said the deal "brings a new, different and better approach to CTMS with broad appeal to large clinical development organizations as well as the largely underserved mid-market sponsors and regional [contract research organizations]"

Valuations

Shares of MDSO are exchanging hands at roughly 20 times forward estimates and with a PEG ratio of 1.3. Fairly middle of the road. But compared to its peers, those metrics are on the low side, so there is some value relative to the industry.

Speaking of the industry, the Medical Info Systems group ranks 27th out of 265 on Zacks.com. MDSO is the top rated of the 15 companies in the industry.

The Chart

MDSO has been volatile but right now shares are nearing oversold territory. It could be a good buying opportunity ahead of its August earnings release.

Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service