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PAREXEL International Explores Sale, Shares Soar Over 7%

Kyle DennisKyle Dennis ·

PAREXEL International Corp (NASDAQ: PRXL) shares were up over 7%, after it was announced that the drug-research company hired investment bankers to explore a sale, according to The Wall Street Journal. Now, this report comes after the company reported its third quarter 2017 fiscal year financial results last week. Let’s get into its valuation, as of yesterday’s close, and earnings report.

PRXL Valuation

As of the close on May 5, 2017, PRXL had a market cap around $3.5B, after the report of its exploration of a sale, its market cap rose to over $3.75B. Here’s a look at PRXL on the daily chart:

Source: Investing.com

Let’s take a look at some valuation ratios now. As of May 5, 2017, PRXL had a trailing 12-month price-to-earnings ratio of 24.5, while the industry average was 42.5. This indicated that PRXL may have been undervalued, in relation to the Diagnostics & Research industry. Moreover, the company had a trailing 12-month price-to-sales ratio of 1.5, which was below its industry average of 3. Additionally, the company had a higher trailing 12-month return on assets (ROA) of 7.3%, which was above the industry average of 3.9%. Moreover, its trailing 12-month return on equity (ROE) was 28.5%, well above the industry average of 8.4%. Consequently, one company could view the stock as undervalued, which could potentially indicate an offer for PAREXEL.

Let’s take a look at the company’s most recent earnings report.

PRXL Q3 2017 Financial Results

PAREXEL International reported its third quarter 2017 financial results on May 3, 2017. The company reported service revenue of $529.3M and adjusted diluted earnings per share of 74 cents. The company’s service revenue grew by 0.4%, year over year.

The company also provided guidance for the fourth quarter of the 2017 fiscal year. PAREXEL expects its fourth quarter 2017 revenue to come in between a range of $531M and $545M. Additionally, it expects its Q4 2017 GAAP EPS to be between a range of 57 cents and 71 cents, and non-GAAP EPS to come in between 87 cents and $1.01.

Additionally, PRXL provided full-year 2017 guidance. The company raised the bottom range of its previous revenue guidance to $2.09B, from $2.08B. However, it lowered the upper end of the guidance range to $2.11B, from $2.12B previously. PAREXEL expects it full-year 2017 GAAP EPS to come in a range between $2.04 and $2.18, which is well below its previously issued guidance. Consequently, its non-GAAP EPS is expected to come in at $3.17 and $3.31, below its previous non-GAAP EPS range of $3.15 and $3.43.

According to PAREXEL CEO Josef von Rickenbach, “The biopharmaceutical services market remains solid, and we continue to identify good opportunities across PAREXEL’s broad range of services…We expect that our rising customer satisfaction positions us well to take advantage of these opportunities and to drive improved revenue performance in Fiscal Year 2018 and beyond.”

Final Thoughts

The Wall Street Journal announced that PAREXEL may be exploring a sale, and the stock rose by over 7% on the day. Now, based on its valuation ratios, as of the previous trading day’s close, the company could potentially be undervalued, in relation to its peers.

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