Certara Reports Modest Growth Amid Persistent Valuation Overhang

What happened

Certara announced FY 2025 revenue of $418.8 million, a 9% increase, and adjusted EBITDA of $134.5 million, up 10%, with Q4 revenue growing 3% to $103.6 million. This performance reflects ongoing demand for biosimulation tools but shows deceleration in quarterly growth compared to the full year. The DeepValue report previously highlighted Certara's strong niche positioning but flagged overvaluation, with the stock trading at ~21x EV/EBITDA and a DCF implying a 25-30% premium. Despite the growth, high goodwill and intangibles (~$1.24 billion) and thin interest coverage (~1.1x) continue to pose financial risks, as emphasized in the report. The provided 2026 guidance suggests expansion, yet it does not fundamentally alter the cautious stance due to valuation and balance sheet concerns.

Implication

The 9% revenue growth in FY 2025 indicates resilience in Certara's core biosimulation business, supported by regulatory tailwinds. However, the slower 3% Q4 growth raises flags about near-term momentum and potential headwinds from R&D budget cyclicality. Adjusted EBITDA growth is positive but must be critically assessed against recurring non-GAAP adjustments and the acquisition-heavy strategy that inflates intangibles. Guidance for 2026 offers a path for upside, but execution risks, competitive pressures, and the need for improved interest coverage remain key watch items. Ultimately, without evidence of sustainable, high-quality organic growth or a valuation correction, the stock lacks margin of safety for value-oriented investors.

Thesis delta

The new financials reinforce the existing 'WAIT' thesis; growth is steady but insufficient to offset overvaluation and balance sheet concerns. No significant shift is warranted unless 2026 guidance execution demonstrates durable organic acceleration or financial resilience improvements. Investors should continue monitoring for the watch items outlined in the DeepValue report, such as net retention rates and interest coverage trends.