Looking to top the CNBC Portfolio Challenge leader board? The following links will help; Week 10 Final Portfolio, Contest Wrap-up and Thoughts • July 18 Bonus Bucks Answers

eResearch Thesis Plays Out, Full Year Outlook Raised

The long-term investment thesis is really beginning to play out quite nicely for shares of eResearch Technology Inc. (ERES). The provider of cardiac safety services that evaluate the safety of new drugs has garnered record new bookings while increasing its share of the cardiac testing market, but it’s been a long time coming. A little over a year ago when we more frequently covered eResearch, the company was in the midst of a turnaround with a relatively new management team at the helm to help right the ship that focused on cost cutting and efficiency improvements to post better earnings. CEO Dr. Michael McKelvey, was right when he said 2006 would represent a “favorable turning point for the company” that would “lead to a successful and more profitable 2007″ and beyond due in part to turnaround efforts and the trend towards outsourcing clinical trials. Since that point in time, better earnings have slowly become more reflective of a resurgence in growth rather than expense reducing measures. The company has indeed capitalized on the outsourcing of clinical trials and overall increased spending on clinical trials by pharmaceutical and biotechnology clients which has boosted market share in addition to benefiting from more trials requiring digital collection of ECG’s. Monday’s first quarter report highlights this and was by far the best in quite some time with net income of $.11 per share, $.02 ahead of estimates, on strong net revenue of $33.7 million, an increase of 59.7% from the prior year period. Gross margin improved to 52.5% from 47.6% in the first quarter of 2007 and bookings topped $50 million compared to just $29.7 million twelve months ago. A real signal that the business is gaining momentum is that management did something it hasn’t done too often; it raised guidance. For the full year 2008, the company increased its revenue outlook to between $133 and $140 million and net income per share of between $.44 to $.49. Previous guidance called for revenue of between $130 and $137 million and net income per share of between $.42 to $.46. So far, the few analysts covering eResearch (case in point, there were just three analysts on the conference call) have adjusted their earnings projections, even into 2009, with the consensus estimate now forecasting earnings to rise 28.6% to $.63 per share on revenue growth of 16% to $163 million. With those estimates, the stock is trading at a pretty inexpensive forward PE of 23, but it might not stay that way if more analysts get on board and spread the eResearch growth story.

Subscribe to our RSS feed to ensure that you receive the latest word on the street.

Related Articles

• June 16, 2008 -- eResearch at $17; Gets Analyst Reiteration, Though Still Lacks Coverage
• May 20, 2008 -- eResearch Double Whammy: Market Selloff and CFO Resignation
• May 12, 2008 -- eResearch Share Grab in Progress, Hits 52-Week High
• June 28, 2007 -- eResearch Turnaround Play Gains Momentum

It's that time of year again. CNBC's Million Dollar Portfolio Challenge will be getting underway on Monday, May 12. The tournament is similar in fashion to last year; each contestant receives 1 million CNBC Bucks and can trade stocks with a minimum market cap of $500 million. In addition to 10 pretty cool weekly prizes, there is a grand prize of $500,000 to the lucky contestant who finishes with the highest portfolio return. The only twist to the tournament is that currency trading is now allowed.

We'll be doing a number of things this time around to help with your trading success and so you can have better shot at winning the tournament. Follow the links below to learn more, and good luck!