Sahm Adrangi and Jordon Giancoli presented their in-depth investment thesis on Parexel (Nasdaq: PRXL) at Best Ideas 2016.
Parexel is a leading Clinical Research Organization (CRO), specializing in the outsourcing of drug trial design, patient recruitment, implementation, and result reporting. Founder/CEO Josef von Rickenbach launched the business in 1982; over the past decade, von Rickenbach grew revenue from $545 million to $2 billion and EPS from $0.36 to $2.70. Multi-year development cycles and two-year revenue backlog lead to recurring growth. Parexel is a premium, moderately levered business trading at 11x 2015E EV/EBITDA and 19x 2016E P/E. The company has a margin expansion opportunity; peers trade for 2.5-3.5x E/V revenue, compared to PRXL’s 1.9x. Trailing GAAP growth understates bookings growth and backlog. Free cash flow is temporarily depressed on growth and cost-cutting capex.
About the instructors:
Sahm Adrangi is the chief investment officer of Kerrisdale Capital Management, a private investment manager that focuses on value and special situations investments. Prior to founding Kerrisdale Capital Management, Sahm was an investment analyst at Longacre Fund Management, a distressed debt credit fund. Prior to Longacre, Sahm worked in the bankruptcy restructuring group at Chanin Capital Partners and the leveraged finance group of Deutsche Bank Securities. Sahm holds a Bachelor of Arts in Economics from Yale University.
Jordon Giancoli is the Director of Research of Kerrisdale Capital Management, a private investment manager known for value investing, special situations investments, and publishing research. Jordon joined Kerrisdale Capital in 2012 and became Director of Research in 2013. Prior to joining Kerrisdale, Jordon was a Senior Associate at Ondra Partners, an international financial advisory firm. Jordon started his career in the mergers & acquisitions group at HSBC Securities, first in London and then in New York. Jordon holds a Bachelor of Applied Science in Biomedical Science from the University of Pennsylvania.
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