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Edison Investment Research Limited: Ergomed (ERGO): What's next after stellar 2020 performance?

·3-min read

Edison Investment Research Limited
02-Jun-2021 / 08:00 GMT/BST

 

London, UK, 2 June 2021

 

Ergomed (ERGO): What's next after stellar 2020 performance?

Although most of 2020 was challenging for the contract research outsourcing (CRO) sector, for Ergomed it was a transformative growth period due to well-balanced pharmacovigilance (PV) and CRO offerings. Ergomed managed to withstand global woes caused by the COVID-19 pandemic and delivered another solid year of growth, organically and through acquisitions. We believe the company will continue to benefit from a clear strategic focus (oncology, rare diseases and pharmacovigilance), order book growth and margin control and strong secular CRO sector growth. Our valuation of £683m or 1,400p/share is virtually unchanged.

 

We maintain our estimates and our valuation is virtually unchanged at £683m or 1,400p/share derived from our DCF model implying an EV/EBITDA multiple of 30.5x based on our FY21 forecasts. We note that Ergomed trades at a premium EV/EBITDA (FY21e) of 26.9x compared to the peer average of 20.0x (in line with Medpace). In this report, we analyse the sensitivity of our valuation to a set of DCF assumptions (long-term sales growth and profit margins). We find that a bull case would correspond to a valuation of 1,950p/share, while a bear case 995p/share. The AGM trading update in June 2021 and full H121 trading update in July 2021 are the next catalysts. 


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All reports published by Edison are available to download free of charge from its website

www.edisongroup.com

About Edison: Edison is a leading research and investor relations consultancy, connecting listed companies to the widest pool of global investors. By focusing on the volume and quality of investors reached - across institutions, family offices, wealth managers and retail investors - Edison can create and gauge intent to purchase, even in the darkest pools of capital, and then make introductions via non-deal roadshows, events or virtual meetings.

Having been the first in-market 17 years ago, Edison now has more than 100 analysts covering every economic sector. Headquartered in London, Edison also has offices in New York, Frankfurt, Amsterdam and Tel Aviv and a presence in Athens, Johannesburg and Sydney.

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Edison is not an adviser or broker-dealer and does not provide investment advice. Edison's reports are not solicitations to buy or sell any securities.

For more information, please contact Edison:

Dr Jonas Peciulis +44 (0)20 3077 5728 healthcare@edisongroup.com

Dr Sean Conroy  +44 (0)20 3077 5700 healthcare@edisongroup.com

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