IQVIA Holdings

IQVIA Holdings Inc is assigned a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a minor 2% discount to our quantitative fair value estimate of $273.09 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's balance sheet bolsters our valuation estimate. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. Reflecting the firm's leverage is its EBITDA/interest coverage ratio of 4.5, which ranks in the bottom 30% compared with peers globally. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be undervalued.

Alternatively, the firm's unfavorable dividend structure is potentially concerning. Dividends represent a stable form of future cash flows returned to shareholders, and low dividend payments can increase the perceived risk of a business. The firm's forward dividend yield of 0%, for example, lies in the bottom 30% compared with peers globally. This could imply a planned dividend cut or relatively high share price, which, despite our favorable price/fair value ratio, is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.