CERT: Shares Will Benefit From Biosimulation Expansion As Pharma Rebound Unfolds

Analysts have modestly trimmed their blended price target on Certara from $13.21 to $12.54 per share, reflecting slightly lower growth and valuation assumptions, even as they highlight the company’s leadership in biosimulation and long term opportunity in modernizing drug development.

Analyst Commentary

Street research remains mixed on Certara, with most analysts recognizing the company’s strategic positioning in biosimulation and drug development modernization, while diverging on the pace of execution and appropriate valuation.

Bullish Takeaways

Bullish analysts highlight Certara’s leading role in biosimulation and its ability to reduce early clinical workload, supporting a premium to traditional software and services peers.
The expansion into discovery and preclinical phases, including through the Chemaxon acquisition, is viewed as a key growth lever that can extend the addressable market and support multiple expansion over time.
Some see Certara as well positioned to benefit from a rebound in pharma and biotech R&D spending, framing the stock as a levered play on industry recovery and digitalization of development workflows.
With shares trading at mid-teens forward EV/EBITDA on some longer dated estimates, bullish analysts argue that the current valuation offers an attractive entry point relative to the company’s long term growth algorithm.

Bearish Takeaways

Bearish analysts point to recent guidance reductions and a slowdown in services bookings as evidence that execution risk remains elevated, warranting more conservative valuation multiples.
There is caution that, while the long term opportunity in modernizing drug development is compelling, proof points around broader adoption and traction in new use cases are still developing.
Some view the risk reward as balanced near term, preferring to wait for clearer signs of reaccelerating growth and improved visibility into bookings trends before taking a more constructive stance.
Concerns that expansion into earlier stage workflows may take longer to fully monetize, and could pressure margins during the investment phase, lead more cautious investors to maintain neutral ratings.

What's in the News

Announced the appointment of Jon Resnick, former senior executive at IQVIA, as Chief Executive Officer effective January 1, 2026. He will succeed Dr. William F. Feehery, whose departure will be treated as a termination without cause under his employment agreement (company announcement).
Completed a share repurchase tranche totaling 3,023,677 shares, or 1.88% of shares outstanding, for $37.08 million under the buyback program announced April 14, 2025. This includes 1,230,398 shares repurchased in the most recent quarter for $13.65 million (company filing).
Issued 2025 earnings guidance, projecting full year revenue in the range of $415 million to $420 million (company guidance).
Launched TFL Studio, the first cloud native module of Phoenix Cloud, to streamline creation of tables, figures, and listings for regulatory submissions. A complementary AI PK Reports module, powered by CoAuthor GenAI, is expected this quarter (product announcement).
Introduced Certara IQ, an AI powered Quantitative Systems Pharmacology platform designed to speed QSP model creation, improve reproducibility and reusability, and run simulations thousands of times faster than traditional tools (product announcement).

Valuation Changes

Consensus Analyst Price Target, represented by fair value, has fallen modestly from $13.21 to $12.54 per share, suggesting slightly more conservative upside expectations.
Discount Rate has risen slightly from 8.70% to 8.78%, implying a marginally higher required return and modestly greater perceived risk.
Revenue Growth has edged down from 7.44% to 7.39%, reflecting a small reduction in long term top line growth assumptions.
Net Profit Margin has increased very slightly from 6.40% to 6.41%, indicating a minimal improvement in expected profitability.
Future P/E multiple has decreased from 79.20x to 75.38x, pointing to a modest compression in the valuation investors are expected to pay for forward earnings.

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