Berenberg initiates coverage on Ergomed at 'buy'

Berenberg said it liked the company for its exposure to two growing end markets and its "niche" market positioning.

"Ergomed grew revenues at a CAGR of 28% in 2014-21 as it has benefited from growing clinical trial volumes, a shift to outsourcing and its positioning in higher-growth therapeutic areas like oncology. While there are several larger global contract research organisations, Ergomed is able to compete with these businesses given its depth of experience in a narrower range of areas," said Berenberg.

"Given that the majority of drug trial sponsors' key criteria for choosing a CRO partner are therapeutic area expertise and patient sourcing capabilities, being a specialist helps a smaller player like Ergomed to have a competitive offering. With Ergomed estimating that its addressable markets will grow at 10%-plus in the medium term, we forecast a relatively conservative 11% revenue CAGR in 2022-24E."

Looking ahead, the German bank believes Ergomed to be well positioned to grow ahead of both end-markets and take share through a combination of both organic and inorganic growth.

"For 2022E, Ergomed trades on 20x EV/EBITDA and 30x P/E for an EPS CAGR of 12% in 2022-24E," said the analysts.

Berenberg also issued the stock with a 1,450.0p target price.

Reporting by Iain Gilbert at Sharecast.com