THE LUCK OF THE IRISH 2

The "Celtic Tiger" has the reputation as the most business-friendly environment in Western Europe, which has helped the Emerald Isle achieve the highest economic growth rates in "Old Europe."

ICON itself is a Dublin-based global contract research organization for drug and medical device makers. They specialize in the strategic development, management and analysis of programs that support clinical development — from compound selection to Phase I-IV clinical studies.

ICON was founded back in 1990, and is a well-established player in the biotech space. ICON teams have successfully conducted over 1,900 development projects and over 2,300 consultancy engagements across all major therapeutic areas. It employs over 4,300 and operates from 49 locations in 30 countries worldwide. That makes ICON a true global player.

Last month, ICON confirmed that 2006 had been a blow-out year, with earnings increasing by nearly two-thirds on robust revenue growth. Full year net revenues increased 33% to $456 million; and operating income increased by 69% to $51.9 million. Full year diluted earnings per share increased to 145 cents, a 69% increase over last year. Full year net business awards totaled $665 million, a 42% increase.

If anything, the Q4 was even more impressive. Sales rose 46% to $129 million, following strong growth at the company’s clinical operations. Adjusted income from operations increased by 65%, to $14.9 million. Fourth-quarter net income rose to $11.4 million, or 39 cents a share, from $7 million, or 24 cents a share, a year ago. That’s an impressive 64% jump — and exceeded analyst expectations of 36 cents.

ICON also continues to become ever more efficient with its clinical segment improving its margins from 11.9% in 2005, to 12.4% in 2006. For 2007, the company raised EPS estimates to $1.28 – $1.30. Revenue is forecasted to grow 20% in 2007, and EPS by 29%.

The bottom line? ICON is a classic growth stock that posts significant earnings growth each and every year and recorded a Compound Annual Growth Rate (CAGR) of 33.1% over the past six years. And at a recent press conference, ICON also confirmed that it has record backlog of $872 million. That’s almost 2x this year’s projected (and recently raised) revenue estimates. Indeed, ICON is a company that is firing on all cylinders.

So buy ICON (ICLR) at market today, and place your initial stop at $35.25. That means that you’re risking about $6.00 per share ($41.25-$35.25) assuming you stick to your stops. So, for every $100 you’d risk on ICON, you’d buy about 17 shares ($100/$6), based on Friday’s closing price of $41.25. The stock is technically oversold, so it should bounce strongly as markets recover. But be aware that as a foreign biotech play, ICON will be one of our more volatile picks. There are no options on this one.

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