Everyone is selling, the charts are red, but should you panic? Not at all. As a long term investor, my favorite time of the economic cycle is when great stocks sell at an unjustified discount. Today I want to bring to light the market’s darling – Medidata Solutions, Inc.. Looking at its size, financial health and track record, I believe there’s an opportunity with Medidata Solutions during these volatile times.
Medidata Solutions, Inc. provides cloud-based solutions for life sciences worldwide. Formed in 1999, and run by CEO Tarek Sherif, the company now has 1.68k employees and with the company’s market capitalisation at US$3.9b, we can put it in the mid-cap group. Typically, large companies are well-established and highly resourced, meaning that stock market volatility may impact some short-term strategic decisions but unlikely to matter in the long run. Therefore, large-cap stocks are a safe bet to buy more of when the general market is selling off.
With US$94m debt on its books, Medidata Solutions has to pay interest periodically. This means it needs to have enough cash on hand to meet these upcoming expenses. With an interest coverage ratio of 5.25x, Medidata Solutions produces sufficient earnings (EBIT) to cover its interest payments. Anything above 3x is considered safe practice. Furthermore, its cash flows from operations copiously covers it debt by 93%, above the safe minimum of 20%. Not to mention, it meets the basic liquidity requirement with current assets exceeding liabilities, which further builds on its financial strength in the face of a volatile market.
MDSO’s annual earnings growth rate has been positive over the last five years, with an average rate of 38%, overtaking the industry growth rate of 16%. Medidata Solutions’s strong performance over time is a demonstration of its ability to grow through cycles, raising my confidence in the company as a long-term investment.
Next Steps:Medidata Solutions makes for a robust long-term investment based on its scale, financial health and track record. Remember, in bear markets, sell-offs can be unjustified. Ask yourself, has anything really changed with Medidata Solutions? If not, then why not scoop it up at a discount? Lining your portfolio with a few well-established companies can reduce your risk and help you scale your wealth in the long run. One thing you should remember though, is to do your homework. Do your own research, come up with your point of view. Below is a list I’ve put together of other things you should consider before you buy:
- Future Outlook: What are well-informed industry analysts predicting for MDSO’s future growth? Take a look at our free research report of analyst consensus for MDSO’s outlook.
- Valuation: What is MDSO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MDSO is currently mispriced by the market.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.