Big spenders came out last week. A trio of Chief Executive Officers (CEO) were matched by three Directors as seven figure buyers.
Directors at Terns Pharmaceuticals, Inc. (TERN), DISH Network Corporation (DISH) and Booking Holdings Inc. (BKNG) spent at least $1.6 million on company stock. CEOs from PVH Corp. (PVH), Health Catalyst, Inc. (HCAT) and Medpace Holdings, Inc. (MEDP) also went big.
It’s CEO August Troendle’s buy that stands above. The head honcho at Medpace Holdings, Inc. (MEDP) acquired nearly $30 million of the Diagnostics & Research company’s stock. (1) It is Troendle’s second time at the buy window since mid-July when he bought close to $4.5 million of MEDP.
Medpace is a scientifically-driven, global, full-service clinical contract research organization (CRO) providing Phase I-IV clinical development services to the biotechnology, pharmaceutical and medical device industries.
The healthcare company’s mission is to accelerate the global development of safe and effective medical therapeutics through its high-science and disciplined operating approach that leverages regulatory and therapeutic expertise across all major areas including oncology, cardiology, metabolic disease, endocrinology, central nervous system and anti-viral and anti-infective.
Prior to the CEO’s recent outlay of $34.4 million, he was nothing but a seller, but not an ordinary seller. He was unloading stock like a kid eating Oreos when its parents aren’t home. From August 2018 through January 2022, Troendle sold 76 times, collecting a whopping $472 million.
That’s about as big a change of heart from a seller to a buyer we may have ever seen.
Let’s try to figure out why the CEO flipped his attitude.
Medpace’s stock price basically tracked the overall market of late. In fact, the CEO could have switched sides in April when shares tanked from $165ish to $125ish in a couple of days. There were plenty of chances for Troendle to purchase the stock between $130 and $140 from May through mid-June, but nope, he didn’t show his new interest until $144.59 in July.
So, it doesn’t look like he was bargain hunting. Earnings and sales could be the motivation, although there are some yellow flags.
Wall Street expects Medpace to earn $6.47 per share (EPS) in 2023 compared to $6.15 this year. Meanwhile, the topline is forecasted to increase from $1.41 billion in 2022 to $1.51 billion next year. (2)
While the top and bottom lines are expected to expand, MEDP’s growth rates are predicted to slow considerably. Earnings are forecasted to expand 27.8% this year compared to 6.64% in 2023. Sales are slated to rise 23.10% in 2022 and dip to 7% next year.
At its five-year average price to earnings (P/E) of 29.44 and price to sales ratio (P/S) of 4.37 with Wall Street’s 2023 EPS and revenue targets, MEDP would price out at $190.48 and $212.86, respectively. The current one-year consensus price target is $145.33, and the healthcare company trades at $163.09 as we type. (3)
While there is potential upside, we aren’t sure if it matches the type of conviction a $34 million investment suggests.
In our opinion, the reason for CEO August Troendle’s action can’t be traced to price or current fundamental expectations. That leaves the possibility of a major news announcement or business is better than Wall Street anticipates.
Overall: A buy like CEO Troendle’s cannot be overlooked. However, Medpace Holdings, Inc. (MEDP) current forecasts are mediocre at best. As a result, MEDP is only appropriate for investors with above average risk tolerance and a time horizon of at least 12-18 months.
1 – https://www.secform4.com/insider-trading/1622058.htm
2 – https://finance.yahoo.com/quote/MEDP/analysis?p=MEDP
3 – https://finance.yahoo.com/quote/MEDP?p=MEDP