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Pra Health Grows Organically, Symphony Synergies a Positive

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On Jun 25, 2018, we have initiated our coverage on PRA Health Sciences, Inc. (PRAH - Free Report) . Notably, PRA Health's organic growth remains strong. Also, the company’s international business is capitalizing on great prospects. However, escalating direct cost remains a concern for PRA Health. The stock carries a Zacks Rank #3 (Hold).

Over the past year, shares of this renowned global Contract Research Organization (CRO) have outperformed the industry it belongs to. The stock has rallied 28.1% compared with the broader industry 11.7% rise.

The company continues to demonstrate solid organic revenue growth. In the first quarter of 2018, organic revenue growth was 15% at constant exchange rate or CER. Symphony integration process is also progressing well with PRA Health expecting to complete the procedure by 2018 end.

 

PRA Health is highly optimistic about this $530-million acquisition, expected to enhance its ability to serve customers throughout the clinical research and commercial development process with technologies providing data and analytics.

We are also encouraged by the company’s diversified client base with top five customers representing approximately 40% of revenues for the last-reported quarter.

The company has been strategically expanding its Asia Pacific operations since 2000 and has supported 345 clinical trials in the region at 4300 plus sites across Australia, China, Hong Kong, India, Japan, Malaysia, New Zealand, Philippines, Singapore, South Korea, Taiwan and Thailand. In March 2018, the company was honoured with the best CRO label in Asia. PRA Health’s focus on the emerging markets looks extremely significant since a point of saturation and growth instability continue to grip the developed markets.

On the flip side, the company persistently incurs direct costs, primarily on increased labor-related costs in its Clinical Research segment as it continues to hire billable staff for growth support. The increase in direct costs also included an unfavorable foreign currency impact of $14 million as compared to the year-ago period tally. Within Data Solutions segment, direct cost shot up mainly due to raised salary and benefit. Moreover, the company  remains pressed underthe tough capital spending environment.

Key Picks

A few better-ranked stocks in the broader medical sector are Genomic Health (GHDX - Free Report) , Abiomed (ABMD - Free Report) and Stryker Corp. (SYK - Free Report) .

Genomic Health has an expected earnings growth rate of 187.5% for the current quarter. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Abiomed has a projected long-term earnings growth rate of 27% and a Zacks Rank of 1.

Stryker has a projected long-term earnings growth rate of 9.7% and a Zacks Rank of 2.

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