ICON (ICLR)

I've recently discovered Polen Capital Management. I think it's my favorite investment firm listed on dataroma. So much of their stakes look like mine. 

For instance, here's their first 10 positions which represent more than 55% of their entire portfolio:

Facebook

Google

Amazon

Adobe

Microsoft

Mastercard

Salesforce

Abbott Labs

Visa

Accenture

Polen seems to like the same stocks than me. So, when such a firm owns a stock I don't know about, I'm always tempted to look further. This time, the stock is ICON public limited company (ICON). It's a company based in Ireland (they probably like to pay as little taxes as possible). Their website states the following: 

We are a global provider of consulting, and outsourced development and commercialisation services to pharmaceutical, biotechnology, medical device and government and public health organisations. We focus our innovation on the factors that are critical to our clients – reducing time to market, reducing cost and increasing quality – and our global team of experts has extensive experience in a broad range of therapeutic areas. ICON has been recognised as one of the world’s leading Contract Research Organisations through a number of high-profile industry awards.

The first thing I take a look at is growth. For the past 5 years, average annual growth was 16%. For the next 5 years, estimated annual growth is 25%. Why growth is supposed to get this high? Because of organic growth but also because of recent acquisitions like PRA Health for 12 billion dollars, last year. 

Then, their earnings are highly predictable (90% on Value Line). That shows the quality of the business. High growth and high predictability. 

Forward PE is "low" given such estimated growth and predictability. Actually, the FWD PE is about 21 (but if you add debt, it's higher than that). It shows that the market is cautious with the last acquisition because these days, we pay much more than that for such growth. However, the stock went up 58% in 2021. Recent history shows a great performance. 

Before the last acquisition, ROE was about 25 (very good) and margins were about 12-15% (good). The debt was well managed before the acquisiton but it's now high. There's also been a lot of dilution. But I believe that this acquisiton will pay. Of course, I may be wrong. But this industry is very specific and the last acquisiton made that company much bigger than it was. Actually, they now have a formal partnership with most of the top 20 biopharma companies in the world. 

So, I decided to reduce one of my stakes to enter a small position with that stock.