ICON plc (ICLR): what the price assumes
In the published model solve dated 2026-Q2, anchored at $176.83, ICON plc (ICLR) is priced for +15.3% growth. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-06-27.
Generated: 2026-07-29 · Exported: 2026-08-01 · Source: https://boothcheck.com/report/ICLR
Headline
| Field | Value |
|---|---|
| Ticker | ICLR |
| Company | ICON plc |
| Current price | $176.83/sh |
| Composition | Ireland 39% / Rest of Europe 19% / U.S. 31% / Rest of World 12% |
What The Price Assumes (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (value-band context) | 3.9% |
| Operating margin (mid-cycle) | 13.3% |
| Margin compression (value-band) | -9.4pp |
| Trailing margin (depressed year) | 4.7% |
| Implied growth | 15.3% |
| Multiple paid | 14x mid-cycle operating income |
The operating-margin figure is value-band context at year 11: derived from the framework's value band, a separate calculation — not part of the priced-in solve.
Solve inputs: computed at a 10.8% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~6.1pp.
Reconcile: at the x-ray's 9.3% required return this reads ~6%/yr; the models below use their own rates.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | -0.15σ |
| cohort percentile (of 116 peers) | 21 |
| sustained it ~5 years at this level | 44% |
| implied end-window share | 0% |
Valuation X-Ray
The price is justified by relative-multiple and growth-DCF; asset-based/earnings-power land below the price.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 9.65x | 5 | expensive |
| Earnings | 2.61x | 4 | expensive |
| Relative | 1.03x | 3 | expensive |
| Growth | 1.20x | 3 | expensive |
Families that justify the price: Relative, Growth Families that call it expensive: Asset, Earnings
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.8%); the inversion above states its own rate.
Per-Model Detail (n=15)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $147.86 | 1.20x | yes | FCF base $0.8B, growth 2% (input: historical growth), terminal g 2.3%, WACC 7.8%, 5yr projection |
| DCF Exit Multiple | Growth | $165.98 | 1.07x | yes | Exit EV/EBITDA: 18.5x / 20.5x / 22.5x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $136.11 | 1.30x | yes | P/E 42.38x (blended: static sector reference 28x + trailing (TTM) 76x), scenarios: 35.9x / 42.4x / 48.9x (bear / base = reference held flat / bull), EV/EBITDA 20x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $25.18 | 7.02x | yes | BV/sh $120.37, ROE (TTM) 1.9%, ke 9.3% |
| Two-Stage Excess Return | Asset | $14.06 | 12.58x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $123.33 | 1.43x | yes | Rev $8.3B, growth 2% (input: historical growth; tapered), Terminal P/S: 1.4x / 1.6x / 1.9x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | $77.88 | 2.27x | yes | Normalized EBIT (5y avg op income, one-time charges added back) $0.82B × (1−21%) / WACC 7.8% → EPV (no growth) |
| Residual Income | Asset | $10.20 | 17.34x | yes | BV $120.37 + 5yr PV of (ROE (TTM) 1.9% − Kₑ 9.3%) × BV; BV grows 1.3%/yr |
| Graham Number | Asset | $79.95 | 2.21x | yes | √(22.5 × EPS $2.36 × BVPS $120.37) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $171.36 | 1.03x | yes | EBITDA $0.77B × sector EV/EBITDA 20.0x |
| FCF Yield | Earnings | $77.09 | 2.29x | yes | FCF $758.9M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $60.34 | 2.93x | yes | SBC-adj FCF $0.64B (FCF $0.76B − SBC $0.12B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $1.98 | 89.31x | yes | EPS $2.36 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median) |
| ROIC-Justified P/B | Asset | $18.33 | 9.65x | yes | BV $120.37 × (ROIC 1.2% / WACC 7.8%) |
| P/Sales Sector | Relative | $643.32 | 0.27x | yes | Revenue $8.28B × sector P/S 6.0x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $25.51 | 6.93x | yes | EPS $2.36 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Net debt | $2.1b |
| Net debt / NOPAT (after-tax) | 2.42x |
| Net debt / operating income (pre-tax) | 1.91x |
| Interest coverage | 5.6x |
| Share count CAGR (buyback) | -1.7% |
| Burning cash | no |
Leverage and coverage are computed on normalized mid-cycle operating income (mid-cycle margin 13.3%); the trailing year was depressed.
Bullet Takeaways
- ICON is one of the world's largest contract research organizations, running clinical trials for drug developers, and its $22.7 billion backlog is the visibility that defines the business.
- The current strain is margin, not demand: first-quarter 2026 bookings were strong with a book-to-bill of 1.42, but adjusted gross margin fell to 24.4% from 28.4% a year earlier, and earnings per share dropped to $1.36 from $1.99.
- Watch the conversion of bookings to revenue and the trajectory of biotech funding, since strong orders today only matter if customers fund the trials those orders represent.
Bull Case
Read the price against the methods and ICON looks reasonably valued for what it is, which is the entry point. At $145.90 (June 27, 2026), the price is justified by the peer-multiple and forward-growth lenses while the asset and earnings-power lenses say expensive, a split that reflects depressed trailing earnings rather than a frothy multiple. The trailing operating margin of about 5.4% is well below the company's normalized mid-cycle margin near 13%, because the most recent results carried margin pressure and likely one-time costs. Valuing a CRO on a temporarily compressed margin understates it. The relative-valuation and exit-multiple methods, which read the price against sector multiples and forward earnings, land essentially at the price, suggesting the market is paying a fair multiple for the recovery.
The order book is the bull's strongest evidence, because in a CRO, today's bookings are tomorrow's revenue. In the first quarter of 2026, ICON reported gross bookings of $3,263 million and net business wins of $2,880 million after cancellations, a book-to-bill ratio of 1.42. A book-to-bill above one means the company is winning new work faster than it is burning through existing work, and 1.42 is a healthy figure. That fed a backlog of $22.7 billion as of March 31, 2026, several years of revenue contracted in advance. Management noted that biotech funding remains constructive, with larger follow-on raises supporting late-stage clinical programs, the demand signal that matters most for a trial operator.
The franchise and balance sheet support the recovery thesis. ICON's scale gives it the global trial-site network, regulatory expertise, and data capabilities that large pharmaceutical clients need to run complex studies, and the company reaffirmed full-year 2026 guidance of $7.85 to $8.15 billion in revenue and adjusted earnings per share of $10 to $11 despite the margin pressure. It recently announced an AI partnership with Microsoft to modernize trial operations, the kind of efficiency investment that can rebuild margin over time. Net debt of about $2.2 billion sits at roughly two times trailing operating income with interest coverage above five times, and the share count has edged down. The bull case is a scale CRO with multi-year backlog visibility, fair valuation, and a path to margin recovery once the funding cycle and mix normalize.
Bear Case
Name the competitors and the demand cycle, because both press on ICON at once. The CRO industry is an oligopoly where ICON competes directly with IQVIA, the largest player, and Charles River and others for the same trial work, and scale matters: IQVIA carried a research-and-development backlog of $31.1 billion at the end of 2024, expecting roughly $7.9 billion to convert to revenue within twelve months. ICON's $22.7 billion backlog is large but sits below the leader's, and in a business where pharmaceutical clients consolidate their trial spend among a few preferred providers, relative scale and breadth determine who wins the next large program. The competitive pressure is constant, and it shows up as pricing concessions and margin give-up to keep winning work.
The margin erosion is the live problem, not a hypothetical one. Adjusted gross margin fell to 24.4% in the first quarter from 28.4% a year earlier, and adjusted EBITDA margin dropped to 15.6% from 19.8%, dragging GAAP earnings per share down to $1.36 from $1.99. That is a meaningful compression, and it reflects the squeeze a CRO faces when biotech funding tightens: smaller clients cancel or delay trials, large clients push for better terms, and the mix shifts toward lower-margin work. Cancellations of $383 million in the quarter are the reminder that backlog is not guaranteed revenue; trials get paused, repriced, or killed when a drug fails or a sponsor runs short of cash. A backlog converts to revenue only as fast as customers fund and execute the studies behind it.
The valuation assumes the margin recovers, which is the assumption most at risk. The price is supported by the forward-growth and peer-multiple lenses precisely because they credit a return toward the roughly 13% normalized margin; the static methods that read the depressed trailing earnings land far below the price, near $31 to $89 per share. If biotech funding stays soft, if pricing pressure persists, or if cancellations rise, the margin recovery the price counts on slips, and the methods that say expensive become the relevant anchor. Revenue was roughly flat in the quarter, down 1.9% on a constant-currency basis, so the top line is not yet growing to offset the margin pressure. The downside is not solvency; the balance sheet is sound. It is that the price pays for a margin and demand recovery in a cyclical, competitive, client-concentrated business, and that recovery depends on a funding environment ICON does not control.
Valuation
What the price assumes is a recovery in profitability rather than rapid growth. The implied figures point to mid-single-digit-plus growth with a margin that normalizes meaningfully above the depressed trailing level: the trailing operating margin near 5.4% sits well below the normalized mid-cycle margin of about 13.3% the model uses. The bet embedded in the price is that ICON's margin returns toward that normalized level as the biotech funding cycle and trial mix recover, which is a reasonable assumption for a scale CRO but is the variable the whole valuation turns on.
How far the price sits from the methods depends on whether you read the trough or the normalized state. The asset and earnings-power lenses, anchored on a book value of $117.74 per share against a depressed return on equity of about 2.5%, land far below the price, near $13 to $89, because a near-zero return on a large book generates little economic value. The peer-multiple and forward-growth lenses land essentially at the price: the relative-valuation method near $142, the exit-multiple DCF near $148. The pattern says the price is justified by what ICON earns at mid-cycle, not by what it earned in a pressured quarter. The right comparison is the CRO cohort, IQVIA and Charles River, where backlog conversion and book-to-bill are the metrics that matter, and ICON's 1.42 book-to-bill and $22.7 billion backlog are competitive within it.
Solvency bounds the downside without resolving the margin question. Net debt of about $2.2 billion sits at roughly two times trailing operating income, interest coverage runs above five times, and the share count has edged down slightly, so the balance sheet comfortably carries the business through the cycle. The decisive number for ICON is the margin: 24.4% adjusted gross margin today versus the higher level the price assumes it recovers to. Whether that recovery materializes depends on biotech funding and competitive pricing, and that is where a holder's return is actually decided.
Catalysts
ICON reported first-quarter 2026 results that paired strong orders with weaker earnings. Revenue was $2,034.0 million, up 0.9% as reported but down 1.9% on a constant-currency basis, and GAAP diluted earnings per share fell to $1.36 from $1.99 a year earlier as adjusted gross margin dropped to 24.4% from 28.4%. The bright spot was demand: gross bookings of $3,263 million and net business wins of $2,880 million produced a book-to-bill of 1.42, lifting backlog to $22.7 billion. Management reaffirmed full-year 2026 guidance of $7.85 to $8.15 billion in revenue and $10 to $11 in adjusted earnings per share, and characterized biotech funding as constructive.
The forward watch items are conversion and efficiency. The strong bookings matter only if they convert to revenue, so backlog burn and cancellation trends are the signals to track, alongside the trajectory of biotech funding that determines whether sponsors fund the trials in the pipeline. On the efficiency side, ICON announced an AI partnership with Microsoft aimed at modernizing trial operations, the kind of initiative that could help rebuild the margin that compressed this quarter. The central question is whether the order momentum and the efficiency investments translate into the margin recovery the guidance and the price both assume.
Peer Cohorts (Per Segment, With Filing Citations)
Core business (reported)
- CRL (CHARLES RIVER LABORATORIES INTERNATIONAL, INC.)
- FY2025 10-K: DSA business, which continued to experience lower volume driven by more cautious client spending as a result of the biopharmaceutical demand environment; partially offset by higher revenue in our RMS business, primarily driven by the increase in large research model product revenue when compared to fiscal year 2024.…
- FY2025 10-K: …with increasing complexity, and more targeted and individualized therapies. While the biopharmaceutical demand environment has been less robust in recent years, we believe that our portfolio provides flexible solutions and scientific expertise that meet the customized needs for virtual and small biotechnology…
- IQV (IQVIA HOLDINGS INC.)
- FY2025 10-K: …and other technological advances in a timely, cost-effective manner or to keep pace with rapid technological change could adversely affect our competitive position and our results of operations. Our future growth and success will depend on our ability to successfully compete with other companies that provide similar…
- FY2025 10-K: …existing or potential clients who are in competition with each other may adversely impact the degree to which other clients or potential clients use our services, which may adversely affect our results of operations. The biopharmaceutical industry is highly competitive, with biopharmaceutical companies each seeking…
- MEDP (Medpace Holdings, Inc.)
- FY2025 10-K: …not keep pace with rapid technological changes, including AI, our services may become less competitive or obsolete. The biopharmaceutical industry generally, and drug development and clinical research more specifically, are subject to rapid technological changes. Our current competitors or other businesses might…
- FY2025 10-K: …committed by companies in which we invest or that we acquired or will acquire. Industry Risks Outsourcing trends in the biopharmaceutical industry and changes in aggregate expenditures and R&D budgets could adversely affect our operating results and growth rate. Our revenues depend on the level of R&D expenditures,…
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
ICON plc Q1 2026 earnings release, 2026 · IQVIA FY2024 10-K, accession 0001478242-25-000045 · ICON plc company announcement, June 2026