Berkshire requires a 25–50% discount to intrinsic value before buying.
Buffett Quality Checklist
✗ROE >15% consistently (≥7 of last 10 years)
✓Free cash flow positive (≥8 of last 10 years)
✓Conservative leverage — Debt/Equity below 1
✓Revenue growing at CAGR >5%
✓EPS growing at CAGR >5%
10-Year Financial History — SEC EDGAR 10-K Filings
Year▲
Revenue▲
Net Income▲
FCF▲
Owner Earnings▲
ROE▲
Net Margin▲
LT Debt▲
Cash▲
2016
$421.6M
$13.4M
$78.2M
$7.3M
2.2%
3.2%
$165.0M
$37.1M
2017
$436.2M
$39.1M
$85.7M
$36.0M
7.7%
9.0%
$205.1M
$26.5M
2018
$704.6M
$73.2M
$140.6M
$66.4M
12.2%
10.4%
$79.7M
$23.3M
2019
$861.0M
$100.4M
$184.0M
$90.9M
13.8%
11.7%
$0
$131.9M
2020
$925.9M
$145.4M
$227.3M
$125.7M
18.0%
15.7%
—
$277.8M
2021
$1.1B
$181.8M
$235.1M
$169.6M
19.1%
15.9%
—
$461.3M
2022
$1.5B
$245.4M
$351.2M
$227.5M
63.5%
16.8%
—
$28.3M
2023
$1.9B
$282.8M
$396.7M
$270.3M
50.6%
15.0%
—
$245.4M
2024
$2.1B
$404.4M
$572.3M
$395.6M
49.0%
19.2%
—
$669.4M
2025
$2.5B
$451.1M
$681.9M
$446.9M
98.3%
17.8%
—
$497.0M
Warren & Charlie
Buffett / Munger — quality, moat & valuation
Medpace Holdings, Inc. (MEDP) — Investment Memo
🐂 The Bull Case (Warren's voice)
Moat = switching costs, and they compound. Regulators chain clients to the same CRO mid-trial. The longer a trial runs, the harder it is to leave. Medpace’s average project lasts 2–5 years — every year in that window deepens the cement. This isn’t a subscription moat; it’s a regulatory moat.
Economics are exceptional — but fragile. Zero debt. $0.7B FCF on $2.5B revenue. ROE of 98% because equity is thin (buybacks), but incremental capital earns >100%. No goodwill, no acquisition hangover. This is compounding from operations, not financial engineering.
Attractive entry price: below $646/share. That’s a 25% margin of safety on the DCF intrinsic value of $861. At that price, you get a monopoly-like business with a 15% growth tailwind for the price of a mediocre compounder. Buffett would wait for a cyclical scare — biotech funding panic — and then load up.
🐻 The Bear Case (Charlie inverts)
Scenario #1: AI kills the labor arbitrage. Medpace charges by the hour (FTE + cost-plus). If an AI-native CRO automates 40% of clinical monitoring and data management, human-hour pricing collapses. Switching costs still matter mid-trial — but at contract start, clients will choose the cheaper robot. Over 5–10 years, this is a structural threat.
Scenario #2: A better-capitalized competitor builds identical infrastructure and undercuts. IQVIA or LabCorp could replicate Medpace’s regulatory SOPs and offer 15% lower pricing. At contract signing, switching costs are zero. Medpace’s pricing power vanishes overnight.
Most likely & timeframe: The AI scenario is real but distant (7–10 years). The pricing war scenario could hit in the next industry downturn — biotech funding dries up, clients become hyper-price-sensitive, and Medpace’s 17.8% net margin becomes a target. They’ll either cut margins or lose volume. Either way, the moat leaks.
25% margin of safety entry: $646/share(conservative buy zone)
50% margin of safety entry: $431/share(Buffett’s “fat pitch”)
Current price ~$750/share (recent close) → trades at a 13% discount to intrinsic value. That’s fair, not cheap. No margin of safety for a business with a thin moat and cyclical customers.
Verdict: WATCH
At $750, Medpace is a wonderful business at a fair price — but fair is not enough for Berkshire, given the structural threats and related-party taint. Wait for a biotech funding scare or a market panic that pushes the stock below $646; then the switching-cost economics become irresistible. Until then, the risk of permanent impairment from AI or pricing pressure outweighs the reward.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.