On Tuesday, JMP Securities initiated coverage on Simulations Plus (NASDAQ:SLP) stock, assigning a Market Perform rating to the company. Simulations Plus, known for its substantial experience in Model Informed Drug Development (MIDD), has been recognized for its dual revenue streams, deriving 60% from MIDD/biosimulation software and the remaining 40% from services.
The company, founded in 1996, has effectively balanced robust organic product development and growth with strategic smaller acquisitions that complement its core operations.
Simulations Plus operates across five key business units, which include Cheminformatics, Physiologically Based Pharmacokinetics, Clinical Pharmacology & Pharmacometrics, Regulatory Strategies, and Quantitative Systems Pharmacology.
The firm appreciates Simulations Plus's comprehensive involvement in the drug development process, extending from discovery to approval. This extensive engagement positions Simulations Plus as a strong competitor within its product domains.
The analyst's commentary underscores the company's established history and its strategic approach to growth and development in the pharmaceutical software and service industries.
Simulations Plus's approach to integrating solid organic growth with targeted acquisitions has been a part of its strategy to maintain a competitive edge in the market. The company's structure and operational strategy are aimed at ensuring it remains a key player in the drug development support sector.
The Market Perform rating suggests that JMP Securities views Simulations Plus's stock as fairly valued at current levels, with the company's current performance and market position reflected in the stock's pricing. This rating indicates a neutral outlook on the stock's potential for price appreciation in the near term.
In other recent news, Simulations Plus reported a 14% increase in third-quarter fiscal year 2024 revenues, reaching $18.5 million, exceeding both Oppenheimer's forecast and the consensus on the street. The company's robust software revenue and continued growth in the services segment contributed to this performance.
However, the earnings per share guidance was revised to between $0.46 and $0.48 due to higher-than-anticipated transaction costs. Despite this, the acquisition of Proficiency is expected to boost earnings per share for the fiscal year 2025.
Simulations Plus also reported the discontinuation of its quarterly cash dividend to prioritize growth investments, with a total backlog of $19.6 million at the end of the third quarter. The company reaffirmed its fiscal 2024 revenue guidance of $69 million to $72 million, with a 15% to 20% year-over-year growth.
The company's software and services segments grew by 12% and 18% respectively, and the acquisition of Proficiency is expected to contribute $3 million to fiscal year 2025 earnings.
These recent developments reflect the company's efforts to strengthen its financial profile and position itself for future growth. Further details and fiscal year 2025 guidance are anticipated during the fourth-quarter fiscal year 2024 conference call. The steadfast Outperform rating and $65 price target by Oppenheimer reflect confidence in the company's strategic direction and financial outlook.
InvestingPro Insights
InvestingPro data highlights Simulations Plus (NASDAQ:SLP) as a company with a strong financial foundation, evidenced by a substantial market capitalization of $851.73M and a robust gross profit margin of 72.53% in the last twelve months as of Q3 2024. The company's revenue growth remains healthy, with a 20.29% increase over the same period. Despite trading at a high earnings multiple with a current P/E ratio of 88.22, the company's liquid assets surpass its short-term obligations, indicating financial stability.
Key InvestingPro Tips reflect the company's financial prudence and positive market performance. Simulations Plus holds more cash than debt, providing a cushion for operations and potential investments. Additionally, the company has seen a significant return over the last week, with a 7.58% increase in price total return, which may interest short-term investors. For those considering a longer-term perspective, it's worth noting that Simulations Plus has maintained dividend payments for 13 consecutive years, showcasing its commitment to returning value to shareholders. Moreover, analysts predict profitability for the company this year, aligning with its positive performance over the last twelve months.
For readers interested in a deeper analysis, InvestingPro offers additional tips that could provide further insights into Simulations Plus's valuation and future prospects. Subscribers can access these tips and more detailed metrics by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 11 more InvestingPro Tips available, investors can make a more informed decision on whether Simulations Plus aligns with their investment strategy.
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