BUSINESS
IQVIA Holdings Inc. provides advanced analytics, technology solutions, and clinical research services to the life sciences industry in the Americas, Europe, Africa, and the Asia-Pacific. It operates through three segments: Technology & Analytics Solutions, Research & Development Solutions, and Contract Sales & Medical Solutions. The Technology & Analytics Solutions segment offers a range of cloud-based applications and related implementation services; real world solutions that enable life sciences and provider customers to generate and disseminate evidence, which informs health care decision making and improves patients’ outcomes; and strategic and implementation consulting services, such as advanced analytics and commercial processes outsourcing services.
INVESTMENT RATING
With future capital returns forecasted to exceed the cost of capital, IQV is expected to continue to be a major Value Builder.
Iqvia Holdings has a current Value Trend Rating of D (Negative).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing inconsistent signals. Iqvia Holdings has a neutral Power Rating of 46 but a poor Appreciation Score of 19, resulting in the Negative Value Trend Rating.
Iqvia Holdings’ stock is selling significantly above targeted value. The current stock price of $243.47 compares to targeted value 12 months forward of $147.
Iqvia Holdings’ low appreciation potential results in an appreciation score of 19 (81% of the universe has greater appreciation potential.)
Iqvia Holdings has a Power Rating of 46. (This neutral Power Rating indicates that IQV’s chances of enjoying attractive investment performance over the near to intermediate term are only average.)
Factors contributing to this neutral Power Rating include: the Commercial Physical, Biological Research comparison group is currently in an unfavorable position; and earnings estimate behavior for IQV has been slightly negative recently. An offsetting factor is recent price action has been neutral.
INVESTMENT PROFILE
IQV’s financial strength is average. Financial strength rating is 47.
Relative to the S&P 500 Composite, Iqvia Holdings Inc has neutral Growth/Value characteristics; its appeal is likely to be to Capital Gain-oriented investors; the perception is that IQV is extremely high risk. High forecasted profitability is a positive for IQV. Relative weaknesses include: low financial strength, high stock price volatility, high financial leverage, and high earnings variability. IQV’s valuation is high: low dividend yield, moderate P/E ratio, and high price/book ratio. IQV has high market capitalization.
CURRENT SIGNALS
Iqvia Holdings’ current operations are strong. Return on equity is rising, reflecting: improving asset utilization; widening pretax margins; and rising leverage.
Iqvia Holdings’ current technical position is very strong. The stock price is in a 2.1 month up move. The stock has appreciated 28.6% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Iqvia Holdings Inc (NYSE: IQV) has benefited from exceptional positive changes in investment behavior: the stock rose on very heavy volume, and its shorter term price trend turned up.
Positive development: significant quarterly earnings acceleration occurred. Negative development: the stock’s power rating fell below 50.
In light of this new information we are reviewing our current Overall Rating of D. This review will be completed in the next several days.
Iqvia Holdings Inc (NYSE: IQV) has reported earnings for its fourth fiscal quarter (ending December 31) of $2.58 versus $1.22 for the same period a year ago. For the latest four quarters through December 31, E.P.S. were $7.39 versus $5.82 for the same period a year ago.
Iqvia Holdings Inc (NYSE: IQV) stock closed at $243.47 on 2/14/24 after a major increase of 13.1%. Moreover, exceptionally high trading volume at 271% of normal accompanied the advance. The stock has risen 13.0% during the last week and has performed in line with the market over the last nine months.
CASH FLOW
In 2022, Iqvia Holdings experienced a significant decline in cash of -$168 million (-11%). Sources of cash were lower than uses. Cash generated from 2022 EBITDA totaled +$2,957 million. Non-operating uses consumed -$60 million (-2% of EBITDA). Cash taxes consumed -$206 million (-7% of EBITDA). Re-investment in the business amounted to -$1,662 million (-56% of EBITDA). On a net basis, debt investors provided +$171 million (+6% of EBITDA) while equity investors withdrew -$1,368 million (-46% of EBITDA).
Iqvia Holdings’ Non-operating Income, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by stability for the Iqvia Holdings Peer Group. In most years, Iqvia Holdings was in the top quartile and second quartile. Currently, Iqvia Holdings is at the upper quartile at -2% of EBITDA (-$60 million).
Iqvia Holdings’ Cash Taxes, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by an opposite trend for the Iqvia Holdings Peer Group. In most years, Iqvia Holdings was in the top quartile and lower quartile. Currently, Iqvia Holdings is at the upper quartile at -7% of EBITDA (-$206 million).
Iqvia Holdings’ Business Re-investment, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Iqvia Holdings Peer Group. (Since 2019 Business Re-investment, %EBITDA has decelerated very sharply.) In most years, Iqvia Holdings was in the second quartile and third quartile. Currently, Iqvia Holdings is substantially below median at -56% of EBITDA (-$1,662 million).
Iqvia Holdings’ Debt Investors, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Iqvia Holdings Peer Group. In most years, Iqvia Holdings was in the top quartile and second quartile. Currently, Iqvia Holdings is above median at +6% of EBITDA (+$171 million).
Iqvia Holdings’ Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Iqvia Holdings Peer Group. (Since 2020 Equity Investors, %EBITDA has sharply decelerated.) In most years, Iqvia Holdings was in the lower quartile and third quartile. Currently, Iqvia Holdings is substantially below median at -46% of EBITDA (-$1,368 million).
Iqvia Holdings’ Change in Cash, %EBITDA has experienced a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Iqvia Holdings Peer Group. In most years, Iqvia Holdings was in the second quartile and third quartile. Currently, Iqvia Holdings is slightly above median at -6% of EBITDA (-$168 million).
Iqvia Holdings’ Cash, %Revenue has experienced a small downtrend over the period. This downtrend was accompanied by a similar trend for the Iqvia Holdings Peer Group. (Since 2020 Cash, %Revenue has acccelerated.) In most years, Iqvia Holdings was in the third quartile and second quartile. Currently, Iqvia Holdings is slightly above median at +9%.
PROFITABILITY
Iqvia Holdings’ return on equity has improved very significantly since 2016. The current level of 19.2% is 14.43X the low for the period and is at the high.
Iqvia Holdings’ very strong negative trend in pretax operating return significantly offset by a very strong positive trend in non-operating factors is a significant analytical factor.
The productivity of Iqvia Holdings’ assets declined over the full period 2013-2023: asset turnover has suffered a very strong overall downtrend even as it experienced a very sharp recovery after the 2016 low.
Additionally, pretax margin has exhibited little to no overall change although it experienced very sharp improvement from the 2018 level.
Non-operating factors (income taxes and financial leverage) had a very significant positive influence on return on equity.
Iqvia Holdings’ return on equity is substantially above median (19.2%) for the four quarters ended September, 2023.
Operating performance (pretax return on assets) is upper quartile (5.3%) reflecting asset turnover that is above median (0.57X) and above median pretax margin (9.2%).
Tax “keep” rate (income tax management) is slightly above median (81.6%) resulting in after tax return on assets that is at the upper quartile.
Financial leverage (leverage) is upper quartile (4.47X).
GROWTH RATES
Overall, Iqvia Holdings’ growth rate has slowed considerably in recent years.
Iqvia Holdings’ historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth.
Annual revenue growth has been 8.1% per year.
Total asset growth has been 20.2% per year. (More recently it has been 4.0%.)
Annual E.P.S. growth has been 12.1% per year. (More recently it has been 83.4%.)
Equity growth has been -3.1% per year.
Iqvia Holdings’ consensus growth rate forecast (average of Wall Street analysts) is 8.7% — in line with the average of the historical growth measures.
Relative to the Iqvia Holdings Peer Group, Iqvia Holdings’ historical growth measures are erratic. Total asset growth (20.2%) has been upper quartile. Revenue growth (8.1%) has been at the upper quartile. E.P.S. growth (12.1%) has been at median. Equity growth (-3.1%) has been lower quartile.
Consensus growth forecast (8.7%) is substantially below median.
PRICE HISTORY
Over the full time period, Iqvia Holdings’ stock price performance has been superior. Between May, 2013 and February, 2024, Iqvia Holdings’ stock price rose +453%; relative to the market, this was a +80% gain. Significant price moves during the period: 1) March, 2020 – December, 2021: +162%; and 2) January, 2016 – June, 2019: +165%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -9.2% is substantially below median relative to the S&P 500 Composite.
In addition to being substantially below median relative to S&P 500 Composite, current annual total return performance through January, 2024 of -9.2% is lower quartile relative to Iqvia Holdings Inc Peer Group.
Current 5-year total return performance of 10.0% is slightly above median relative to the S&P 500 Composite.
Through January, 2024, with slightly above median current 5-year total return of 10.0% relative to S&P 500 Composite, Iqvia Holdings’ total return performance is upper quartile relative to Iqvia Holdings Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, IQV’s overall valuation is quite high. The highest factor, the price/equity ratio, is upper quartile. Price/earnings ratio is upper quartile. Ratio of enterprise value/assets is above median. Ratio of enterprise value/earnings before interest and taxes is upper quartile. The lowest factor, the ratio of enterprise value/revenue, is slightly above median.
Relative to Iqvia Holdings Peer Group, IQV’s overall valuation is quite high. The highest factor, the price/equity ratio, is upper quartile. Ratio of enterprise value/assets is upper quartile. Ratio of enterprise value/revenue is near the upper quartile. Ratio of enterprise value/earnings before interest and taxes is at the upper quartile. The lowest factor, the price/earnings ratio, is at median.
Iqvia Holdings has a major value gap compared to the median. For IQV to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 3.92X to 2.36X. If IQV’s ratio of enterprise value/revenue were to fall to 2.36X, its stock price would be lower by $-127 to $116.
For IQV to achieve upper quartile valuation relative to the Iqvia Holdings Peer Group, its current ratio of enterprise value/revenue would have to rise from the current level of 3.92X to 4.18X. If IQV’s ratio of enterprise value/revenue were to rise to 4.18X, its stock price would increase by $21 from the current level of $243.
VALUE TARGETS
With future capital returns forecasted to exceed the cost of capital, IQV is expected to continue to be a major Value Builder.
Iqvia Holdings’ current Price Target of $146 represents a -40% change from the current price of $243.47.
Iqvia Holdings’ low appreciation potential results in an appreciation score of 19 (81% of the universe has greater appreciation potential.)
With this low Appreciation Score of 19, the neutral Power Rating of 46 results in an Value Trend Rating of D.
Iqvia Holdings’ current Price Target is $146 (+7% from the 2022 Target of $137 but -40% from the 02/14/24 price of $243.47). This slight rise in the Target is the result of a +5% increase in the equity base and a +2% increase in the price/equity multiple. The forecasted increase in return on equity has a very large positive impact on the price/equity multiple and the forecasted decline in cost of equity has a slight positive impact as well. Partially offsetting these Drivers, the forecasted decline in growth has a very large negative impact.
PTR’s return on equity forecast is 35.0% — above our recent forecasts. Forecasted return on equity enjoyed a dramatic, steady increase between 2014 and 2022. The current forecast is significantly above the 2015 low of 4%.
PTR’s growth forecast is 4.0% — slightly below our recent forecasts. Forecasted growth suffered a dramatic, erratic decline between 2014 and 2022. The current forecast is well below the 2018 peak of 11%.
PTR’s cost of equity forecast is 12.6% — in line with recent levels. Forecasted cost of equity suffered a dramatic, steady increase between 2014 and 2022. The current forecast is well above the 2015 low of 2.8%.
At Iqvia Holdings’ current price of $243.47, investors are placing a positive value of $149 on its future investments. This view is consistent with the company’s most recent performance that reflected a growth rate of 8.0% per year, and a return on equity of 29.1% versus a cost of equity of 13.0%.
PTR’s 2024 Price Target of $146 is based on these forecasts and reflects an estimated value of existing assets of $125 and a value of future investments of $20.
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