Medpace Holdings, Inc. (MEDP): A Bull Case Theory

We came across a bullish thesis on Medpace Holdings, Inc. (MEDP) on Substack by Tired Salary Bear. In this article, we will summarize the bulls’ thesis on MEDP. Medpace Holdings, Inc. (MEDP)'s share was trading at $304.11 as of April 3^rd. MEDP’s trailing and forward P/E were 24.10 and 24.39 respectively according to Yahoo Finance.

Medpace Holdings (MEDP) represents a high-quality, underappreciated player in the clinical research space, operating as a full-service Contract Research Organization (CRO) that supports the biopharmaceutical industry throughout the clinical trial process, primarily in Phases I-IV. The company plays a mission-critical role in helping biotech firms, particularly small to midsize players, advance drug candidates through regulatory approval. Its physician-led teams, specialized expertise in complex therapeutic areas like oncology, cardiology, and rare diseases, and full-service model create high switching costs and client stickiness. As the CRO industry scales and outsourcing trends accelerate—outsourced pharmaceutical R&D rising from 36% in 2015 to a projected 56% by 2025—Medpace is exceptionally positioned. Serving clients that lack in-house capabilities, Medpace’s business model thrives on continuity, given that switching CROs mid-trial is costly, risky, and delays clinical development, thus reducing the potential patent-protected revenue window. The CRO typically remains the drug sponsor’s partner even after FDA approval, ensuring long-term revenue durability.

Financially, Medpace is a compounding machine. Diluted EPS has grown at a 55.4% CAGR since 2016, from $0.37 to $12.63 in 2024, with return on capital consistently in the 28–40% range—impressive for a labor-intensive business that scales efficiently once infrastructure is in place. Its capital intensity remains low, with capex at 10% of operating cash flow and share-based compensation a modest 4% of cash flows. Morningstar grants Medpace a narrow moat based on its deep client relationships, high switching costs, and proprietary expertise, reinforced by late-stage trial exposure where stakes are high and reliability is paramount. Ownership by founder CEO Dr. Troendle (15.8%) ensures long-term alignment. Therapeutically, Medpace benefits from robust growth trends in oncology (its largest revenue driver at 39.2%), rare diseases, and metabolic/cardiovascular trials—all expanding faster than the broader clinical trials market.

With an average PE of 32x, current pricing implies a 27% undervaluation, and a potential multiple rerating adds further upside. Even under conservative 8% normalized EPS growth assumptions, value continues compounding over time. Despite strong fundamentals, shares have declined 14% over the past five years, offering a unique entry point. Shareholder yield is modest at 0.5%, but long-term compounding from earnings growth and potential multiple expansion provide a compelling risk/reward setup. Medpace, like picks and shovels in a gold rush, quietly powers the biotech engine, and the market’s mispricing of its structural advantages and growth potential may be a timely opportunity for investors.

Medpace Holdings, Inc. (MEDP) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 42 hedge fund portfolios held MEDP at the end of the fourth quarter which was 41 in the previous quarter. While we acknowledge the risk and potential of MEDP as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MEDP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.