CERT: Shares Will Benefit From Biosimulation Leadership As Pharma Rebound Emerges

The analyst price target for Certara has been modestly reduced from $13.50 to about $13.21, as analysts balance near term headwinds in services bookings with growing confidence in the company’s leadership in biosimulation and its longer term role in modernizing drug development.

Analyst Commentary

Recent research updates reflect a generally constructive but selective stance on Certara, with views splitting between enthusiasm for its strategic position in biosimulation and caution around execution risk and near term bookings softness.

Bullish Takeaways

Bullish analysts see Certara as a clear leader in biosimulation, arguing that its technology can reduce reliance on early stage clinical work and structurally improve drug development productivity, supporting a premium multiple over time.
The acquisition of Chemaxon is viewed as strategically important for deepening penetration into discovery and preclinical workflows, expanding the addressable market and reinforcing a multi year growth narrative.
Some bullish analysts emphasize Certara’s position at the center of a potential pharma and biotech R&D rebound, suggesting that rising investment in complex programs could accelerate demand for its platforms.
With shares trading at what is viewed as a reasonable 2026 EV/EBITDA multiple, bullish analysts argue that current levels offer an attractive entry point relative to the company’s long term growth and margin potential.

Bearish Takeaways

Bearish analysts remain cautious on near term execution after guidance was reset lower on services bookings, seeing risk that softer activity could weigh on growth and sentiment until trends stabilize.
Some remain unconvinced that Certara’s modernization initiatives are yet translating into consistently accelerating adoption, preferring to see clearer evidence of traction before endorsing a more aggressive valuation.
There is concern that, despite strategic assets, the current share price already discounts a significant portion of the long term opportunity, leaving less room for error on both growth and profitability targets.
Mixed rating and target actions highlight uncertainty around the pace at which Certara can convert its leadership in biosimulation and expanded discovery footprint into sustained, high visibility revenue growth.

What's in the News

Issued 2025 revenue guidance of $415 million to $420 million, giving investors a clearer view of the company’s growth trajectory and demand outlook (company guidance)
Completed a share repurchase program totaling 3,023,677 shares, or 1.88% of shares outstanding, for $37.08 million, signaling confidence in the company’s long term value (buyback update)
Launched TFL Studio, the first cloud native module of Phoenix Cloud, to streamline creation of tables, figures, and listings for regulatory submissions and scientific publications using AI enabled workflows (product announcement)
Announced Certara IQ, an AI powered Quantitative Systems Pharmacology platform designed to speed model building, improve reproducibility, and run simulations thousands of times faster than traditional tools (product announcement)

Valuation Changes

Fair Value: Reduced slightly from $13.50 to about $13.21 per share, reflecting modestly lower growth expectations despite sustained confidence in the long term opportunity.
Discount Rate: Edged down marginally from roughly 8.77 percent to about 8.70 percent, indicating a slightly lower perceived risk profile in the updated model.
Revenue Growth: Trimmed from approximately 8.03 percent to about 7.44 percent, signaling a more cautious outlook on top line expansion in the near to medium term.
Net Profit Margin: Increased meaningfully from around 3.80 percent to about 6.40 percent, suggesting improved expectations for operating leverage and profitability.
Future P/E: Declined significantly from about 134.5x to roughly 79.2x, pointing to a less aggressive long term valuation multiple as earnings expectations and risk assumptions are recalibrated.

Regulatory approvals and industry trends are boosting demand for Certara's biosimulation platforms, expanding its market and supporting stronger revenue streams.
Product innovation, strategic acquisitions, and cloud-based SaaS models increase customer retention, cross-selling, and margins, enhancing long-term profitability and earnings stability.
Certara's growth and profitability face risks from slow pharma adoption, reliance on large customers, rising costs, regulatory uncertainty, and possible delays in achieving returns from technology investments.

Catalysts

About Certara

Provides technology-enabled services and software products for biosimulation in drug discovery, preclinical and clinical research, regulatory submissions, and market access in the United States and internationally.What are the underlying business or industry changes driving this perspective?

The recent qualification of Certara's Simcyp platform by the European Medicines Agency sets it apart as the only PBPK modeling tool with such approval, likely to increase customer adoption among global pharma companies seeking regulatory certainty and speed for their drug approvals, supporting future revenue growth.
Strong industry and regulatory momentum-such as the FDA's guidance to phase out animal testing in monoclonal antibody development-are rapidly increasing the need for biosimulation and model-informed drug development, expanding Certara's addressable market and driving sustained demand, positively impacting both revenues and bookings.
The upcoming commercial launch of Certara's next-generation, AI-enabled MIDD platform and CertaraIQ QSP software leverages advanced analytics and machine learning, providing differentiated capabilities that democratize access and increase the potential customer base, which should translate to higher recurring revenue and margin expansion through cloud-based SaaS models.
Integration of newly acquired businesses (like Applied BioMath and Formedix), combined with more robust cross-selling between consulting and software offerings, positions Certara to drive higher deal sizes and improve operating leverage, which strengthens both net margins and operating income over time.
Investment in cloud-based delivery and ongoing product innovation (as shown with updates to Phoenix and Pinnacle21 suites) further enhances customer stickiness and predictability of subscription revenue, supporting gross margin stability and long-term earnings growth.

Certara Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Certara's revenue will grow by 8.6% annually over the next 3 years.
Analysts assume that profit margins will shrink from 2.0% today to 1.4% in 3 years time.
Analysts expect earnings to reach $7.4 million (and earnings per share of $0.04) by about September 2028, down from $8.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 385.3x on those 2028 earnings, up from 211.3x today. This future PE is greater than the current PE for the US Healthcare Services industry at 54.8x.
Analysts expect the number of shares outstanding to decline by 0.22% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.27%, as per the Simply Wall St company report.

Certara Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The company faces potential headwinds from pharmaceutical industry cost containment, large pharma customer caution, and increased geopolitical and macroeconomic uncertainty-factors (including proposed tariffs and new pricing algorithms) that could delay decision-making and depress R&D budgets, which would negatively impact Certara's revenue and bookings growth in the long term.
Certara's R&D and operational spending has been increasing, with significant discretionary investments in software development, AI, and new product launches, and with the integration of multiple recent acquisitions. If these investments fail to generate expected adoption or ROI, operating expenses and margin pressure could undermine net earnings and profitability.
The company's continued growth depends heavily on adoption of new technologies (AI-enabled platforms, next-generation QSP products, etc.) and regulatory acceptance; any delays, low market uptake, or challenges in convincing regulators to integrate AI with model-informed drug development could slow software growth and diminish future revenues.
Although there is optimism about the multibillion-dollar addressable market for biosimulation (especially due to moves like the FDA's push to phase out animal testing), the adoption curve in pharma is often slow and complex, with many customers only piloting or cautiously expanding platform use-if customer education, regulatory clarity, or adoption stalls, bookings and revenue growth may not materialize as quickly as projected, affecting long-term earnings.
Certara's top-line and financial performance remains exposed to customer tier concentration; softness or timing issues from large Tier 1 customers can cause significant volatility in bookings and renewal cycles, making revenue less predictable and increasing risk to both revenue consistency and operating margins if consolidation or budget reductions occur among top clients.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $14.111 for Certara based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $11.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $519.5 million, earnings will come to $7.4 million, and it would be trading on a PE ratio of 385.3x, assuming you use a discount rate of 8.3%.
Given the current share price of $10.5, the analyst price target of $14.11 is 25.6% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Maintain Certara Price Target as Pharma Sector Recovery and New Developments Drive Outlook