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Certara (CERT)
NASDAQ:CERT

Certara (CERT) AI Stock Analysis

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Certara

(NASDAQ:CERT)

Rating:74Outperform
Price Target:
$13.50
▲(12.59%Upside)
The overall score reflects strong revenue growth and a positive strategic outlook from the earnings call, bolstered by effective cash flow management and a solid balance sheet. However, the stock faces challenges in profitability, as reflected in its valuation metrics, and technical indicators suggest cautious short-term sentiment.
Positive Factors
Client Interest
Certara is seeing increased customer interest, which could drive future revenue growth.
Regulatory Changes
The recent FDA announcement to gradually reduce animal testing in favor of new approach methodologies, including in silico tools and AI/ML, may positively impact Certara's opportunity set.
Negative Factors
Demand Trends
Demand trends for the company’s core biosimulation business remain challenged.
Market Conditions
Certara continues to grapple with cautious customer spending dynamics caused by a number of macro headwinds, including the downstream effects of IRA price controls, an erratic capital-raising environment for biotechs, and the potential for new trade and healthcare policies from the current administration.

Certara (CERT) vs. SPDR S&P 500 ETF (SPY)

Certara Business Overview & Revenue Model

Company DescriptionCertara (CERT) is a leading provider of biosimulation software and technology-enabled services that accelerate drug discovery and development. Operating within the healthcare and life sciences sectors, Certara offers a comprehensive suite of solutions designed to optimize and streamline the drug development process. The company's core products and services include modeling and simulation software, regulatory science consulting, and clinical pharmacology services, which help pharmaceutical companies and regulatory agencies make data-driven decisions.
How the Company Makes MoneyCertara primarily makes money through the sale of software licenses and the provision of consulting services. Its revenue model includes licensing fees for its biosimulation software platforms, which are utilized by pharmaceutical and biotechnology companies to predict drug behavior and efficacy. Additionally, Certara generates significant income from its consulting services, where it offers expert advice and strategic insights to optimize drug development pipelines. The company also engages in long-term contracts and partnerships with major pharmaceutical firms and regulatory bodies, further stabilizing and enhancing its revenue streams. Key revenue streams include software licensing, consultancy fees, and long-term strategic partnerships, which collectively contribute to Certara's financial performance.

Certara Earnings Call Summary

Earnings Call Date:May 05, 2025
(Q1-2025)
|
% Change Since: -6.18%|
Next Earnings Date:Aug 12, 2025
Earnings Call Sentiment Positive
The earnings call presented a generally positive outlook for Certara, driven by strong revenue and bookings growth, the launch of new software versions, and the FDA's announcement favoring their product offerings. While market headwinds and specific segment softness were noted, the company's strategic initiatives and new opportunities seemed to outweigh the challenges.
Q1-2025 Updates
Positive Updates
Strong Revenue and Bookings Growth
Certara reported first quarter revenue of $106 million, representing a 10% growth compared to Q1 2024. Bookings reached $118.2 million, a 12% increase from the previous year.
Significant Software Segment Performance
Software revenue for Q1 2025 was $46.4 million, an 18% increase from the prior year, with software bookings growing by 23%. Chemaxon contributed $5.9 million to software revenue.
FDA Announcement on Animal Testing Phase-Out
The FDA's announcement to phase out animal testing has led to significant interest in Certara's Non-Animal Navigator solution, which leverages AI and modeling to replace animal testing in drug development.
Launch of Simcyp Simulator Version 24
Certara announced the 24th version of its Simcyp Simulator, featuring new drug interaction libraries and enhanced modeling capabilities. Simcyp has supported over 120 FDA-approved novel drug applications.
Share Repurchase Program
Certara announced a $100 million share repurchase authorization, with approximately $25 million repurchased to date, reflecting confidence in the company's long-term growth strategies.
Adjusted EBITDA Growth
Adjusted EBITDA for Q1 2025 was $34.8 million, up from $29.1 million in Q1 2024, with a margin of 33%.
Negative Updates
Continued Market Headwinds
Certara faces headwinds from IRA price controls, an erratic capital raising environment for biotechs, and potential new trade and healthcare policies.
Softness in Tier 1 Biosimulation Services
There was noted softness in the Tier 1 customer base for biosimulation services, impacting growth in that segment.
Lower Software Net Retention Ratio
The software net retention ratio was reported at 102%, below the historical average, due to expected timing of software revenue achievement.
Company Guidance
During Certara's First Quarter 2025 Earnings Conference Call, significant guidance was provided detailing the company's financial performance and future outlook. Certara reported first-quarter revenue of $106 million, reflecting a 10% increase from the same period in 2024. Bookings for the quarter were $118.2 million, up 12% year-over-year, with software bookings growing by 23% and services bookings by 7%. Chemaxon significantly contributed $5.9 million to revenue and $4.9 million to bookings. The guidance for the full year anticipates total revenue between $415 million and $425 million, with Chemaxon expected to contribute $23 million to $25 million. Adjusted EBITDA margins are projected to be between 30% and 32%, with adjusted EPS in the range of $0.42 to $0.46. Certara emphasized strategic investments in AI integration and biosimulation model development, particularly in response to the FDA's recent move to phase out animal testing, which is expected to positively impact the company's future growth trajectory.

Certara Financial Statement Overview

Summary
Certara demonstrates strong revenue growth and efficient cash flow management, with a solid balance sheet characterized by low leverage. However, profitability remains a concern with negative net income impacting return on equity. Continued focus on improving margins and addressing profitability challenges could enhance financial health further.
Income Statement
75
Positive
The company exhibits steady revenue growth with a TTM (Trailing-Twelve-Months) revenue increase of 2.43% compared to the previous year. Gross profit margin has remained strong at 56.9%, indicating effective cost management. However, the net profit margin is negative at -0.66%, reflecting challenges in achieving profitability. The EBIT and EBITDA margins are 3.35% and 7.48% respectively, showing improvement in operational efficiency compared to past negative EBIT figures.
Balance Sheet
80
Positive
Certara maintains a solid balance sheet with a debt-to-equity ratio of 0.01, indicating low leverage and financial risk. The equity ratio stands at 69.45%, reflecting a strong equity base relative to total assets. However, the return on equity is negative at -0.24%, suggesting profitability issues that need addressing.
Cash Flow
85
Very Positive
The cash flow position is robust with a free cash flow of $89.45 million, showcasing a healthy cash generation capability. The operating cash flow to net income ratio is high at 35.63, highlighting efficient cash conversion despite net losses. Free cash flow to net income ratio is substantial, demonstrating strong cash flow relative to net income.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
394.50M385.15M354.34M335.64M286.10M243.53M
Gross Profit
224.52M230.63M213.31M203.07M174.49M142.76M
EBIT
13.20M-1.73M-40.77M32.52M13.58M-24.89M
EBITDA
29.51M72.37M23.84M89.00M58.58M17.87M
Net Income Common Stockholders
-2.63M-12.05M-55.36M14.73M-13.27M-49.40M
Balance SheetCash, Cash Equivalents and Short-Term Investments
179.09M179.18M234.95M236.59M185.80M271.38M
Total Assets
1.56B1.58B1.56B1.57B1.51B1.27B
Total Debt
12.83M311.90M302.57M308.11M303.02M299.37M
Net Debt
-166.25M132.71M67.62M71.52M117.22M27.99M
Total Liabilities
476.73M516.45M516.30M493.26M469.88M447.27M
Stockholders Equity
1.08B1.06B1.05B1.08B1.04B822.13M
Cash FlowFree Cash Flow
89.45M78.84M67.43M80.01M51.49M36.87M
Operating Cash Flow
93.52M80.47M82.75M92.54M60.39M44.81M
Investing Cash Flow
-114.56M-112.37M-79.55M-27.84M-269.92M-8.61M
Financing Cash Flow
-24.66M-21.01M-9.45M-7.36M123.39M208.21M

Certara Technical Analysis

Technical Analysis Sentiment
Positive
Last Price11.99
Price Trends
50DMA
12.05
Positive
100DMA
12.20
Negative
200DMA
11.63
Positive
Market Momentum
MACD
-0.06
Negative
RSI
55.45
Neutral
STOCH
78.16
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CERT, the sentiment is Positive. The current price of 11.99 is above the 20-day moving average (MA) of 11.61, below the 50-day MA of 12.05, and above the 200-day MA of 11.63, indicating a bullish trend. The MACD of -0.06 indicates Negative momentum. The RSI at 55.45 is Neutral, neither overbought nor oversold. The STOCH value of 78.16 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for CERT.

Certara Risk Analysis

Certara disclosed 42 risk factors in its most recent earnings report. Certara reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks

Certara Peers Comparison

Overall Rating
UnderperformOutperform
Sector (54)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
74
Outperform
$1.95B-0.25%9.37%95.72%
SLSLP
70
Outperform
$547.42M76.183.96%0.88%21.49%-31.23%
67
Neutral
$1.46B66.881.73%3.00%
61
Neutral
$1.92B-43.33%22.29%-32.89%
PHPHR
58
Neutral
$1.67B-15.97%16.29%66.01%
EVEVH
54
Neutral
$1.05B-10.99%10.24%2.63%
54
Neutral
$5.38B3.40-45.06%3.28%16.75%-0.02%
* Healthcare Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
CERT
Certara
12.18
-3.37
-21.67%
OMCL
Omnicell
30.39
1.36
4.68%
SLP
Simulations Plus
26.44
-22.74
-46.24%
EVH
Evolent Health
8.64
-14.55
-62.74%
PHR
Phreesia
28.19
7.77
38.05%
SDGR
Schrodinger
26.69
5.05
23.34%

Certara Corporate Events

Executive/Board ChangesShareholder Meetings
Certara Holds Annual Stockholders Meeting on May 21
Neutral
May 22, 2025

On May 21, 2025, Certara, Inc. held its annual stockholders meeting, where several key proposals were voted on. The stockholders elected four Class II directors to the board, ratified the selection of RSM US LLP as the independent auditor for 2025, and approved the executive compensation on a non-binding advisory basis. These decisions are crucial for Certara’s governance and operational strategies, potentially impacting its market positioning and stakeholder confidence.

The most recent analyst rating on (CERT) stock is a Hold with a $14.50 price target. To see the full list of analyst forecasts on Certara stock, see the CERT Stock Forecast page.

Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.