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Cramer: New IPO shows long-term promise

Lots of companies have come public over the past 18 months, but only a few of them are still of interest to Jim Cramer.

"Many newly minted stocks that seemed promising, turned out to be duds," Cramer said. "However, Quintiles, priced at $40 per share and then slowly but steadily worked its way higher, just like a good investment should."

That's the kind of stock Cramer thinks is well worth revisiting.



Roger Spooner | Photographer's Choice | Getty Images

Cramer first said the stock warranted attention on "Mad Money" in May of last year, shortly after the company came public. Since that time, shares have advanced more than 30 percent.

Of course the question becomes, can the advance continue?

Looking at the business, Quintiles is a company that conducts outsourced clinical trials to help drug developers save costs. Largely Quintiles specializes in later phase trials, helping a promising drug win FDA approval and make its way to market.

Currently, Cramer sees at least 4 reasons to like this company.

1. Demand. In a nutshell, Cramer said business is booming. "In 2012, contract research organizations controlled roughly 36 percent of the market but by 2018, that figure is expected to reach nearly 50 percent."

2. Proliferation of small-cap biotech companies. Last year a number of young biotechs flooded the market in an attempt to capture investor interest. Now, Cramer says, the fortunes of these companies lie with the success of their drugs. And many of these smaller drug developers simply can't afford to run a drug trial on their own.

3. Expertise in phase 2 and 3 trials. Quintiles isn't only a destination for small biotech firms; Cramer said many clients are big pharma companies, too. "And big pharma is allocating sizable R&D money to phase 2 and 3 trials, in an attempt to get their drugs to market and more quickly boost the bottom line."

4. Strong earnings. Quintiles has been able to consistently post a series of strong results since coming public. Cramer says it's a sign management can execute, consistently.

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All told, Cramer thinks the aforementioned catalysts should drive business and therefore provide good reasons to own the stock.

"This stock is selling for 19 times next year's earnings estimates with a 13 percent long-term growth rate. That's not super expensive." Given the catalysts outlined above, "I think this stock could have a lot more upside."



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