Premier health seems to be flashing some hands off signals at the moment.Based on an analysis of earnings against potential growth, fair value for
PINC
would be around $40.38, but the stock is trading 54% below that target. They are even trading below the average analyst target of $33.40. These are signs that something is weighing on the market value of the firm.
Potential Issues for Investors Include:
1. Cash to Equity at 4%: This suggests that the company has an insufficient amount of cash to fuel growth and handle liabilities. I would direct investor attention to the company's negative working capital and 20% drop in operating cash flows.
2. Shareholder Dilution: Premier seems to be constantly issuing new shares, which negates any market value that could be had from an increase in earnings.
3. Net Cash Negative: Total debt held by the company is down trailing 12 months, but still leaves the company with -$3.31 net cash per share over that same time period.
Key Point: The company is over leveraged amidst tight financial conditions and margins in the healthcare space are dropping like a hot rock. This draws concern as the company has been working with negative working capital for 5 straight years.
To mention a few bright spots, the company generating $84 in free cash flow for every $100 in earnings and seems to at least over the past 12 months be looking to reduce their debt. The company is projected to see earnings growth of 5.6% over the next 5 years, but is priced for no growth.
Investors who look at this as a mispricing and buy today could see a push toward our forward looking valuations. This could yield as much as a 55% increase in the stock price. On the other hand the key question would be; can the company survive long enough to fix the problems?
Investors who believe they will survive can look at this as a reasonable opportunity to buy ahead of any capital appreciation.
Earnings are steady over the long term with over 4,400 member hospitals in their circle which should keep the money coming in.
Worst case scenario, they become an acquisition target down the line, but in the mean time, I the market is sending signals that hands off is the policy.
No growth value is definitely an enticing price point, but maybe a look at next quarter's earnings could provide more insight on the company's direction.
PINC faces increased competition from other healthcare improvement companies, such as Optum and UnitedHealth Group. These companies are investing heavily in new technologies and solutions, which could put pressure on PINC's margins.
PINC also faces a number of regulatory challenges, such as the implementation of the Affordable Care Act and the rising cost of healthcare. These challenges could make it difficult for PINC to grow its business and maintain its profitability.
Income and cash flows have taken a step down in 2023. Cash flows are projected to continue to decline in 2024 and return to growth in 2025.
PINC
would be around $40.38, but the stock is trading 54% below that target. They are even trading below the average analyst target of $33.40. These are signs that something is weighing on the market value of the firm. Potential Issues for Investors Include:
1. Cash to Equity at 4%: This suggests that the company has an insufficient amount of cash to fuel growth and handle liabilities. I would direct investor attention to the company's negative working capital and 20% drop in operating cash flows.
2. Shareholder Dilution: Premier seems to be constantly issuing new shares, which negates any market value that could be had from an increase in earnings.
3. Net Cash Negative: Total debt held by the company is down trailing 12 months, but still leaves the company with -$3.31 net cash per share over that same time period.
Key Point: The company is over leveraged amidst tight financial conditions and margins in the healthcare space are dropping like a hot rock. This draws concern as the company has been working with negative working capital for 5 straight years.
To mention a few bright spots, the company generating $84 in free cash flow for every $100 in earnings and seems to at least over the past 12 months be looking to reduce their debt. The company is projected to see earnings growth of 5.6% over the next 5 years, but is priced for no growth.
Investors who look at this as a mispricing and buy today could see a push toward our forward looking valuations. This could yield as much as a 55% increase in the stock price. On the other hand the key question would be; can the company survive long enough to fix the problems?
Investors who believe they will survive can look at this as a reasonable opportunity to buy ahead of any capital appreciation.
Earnings are steady over the long term with over 4,400 member hospitals in their circle which should keep the money coming in.
Worst case scenario, they become an acquisition target down the line, but in the mean time, I the market is sending signals that hands off is the policy.
No growth value is definitely an enticing price point, but maybe a look at next quarter's earnings could provide more insight on the company's direction.
PINC faces increased competition from other healthcare improvement companies, such as Optum and UnitedHealth Group. These companies are investing heavily in new technologies and solutions, which could put pressure on PINC's margins.
PINC also faces a number of regulatory challenges, such as the implementation of the Affordable Care Act and the rising cost of healthcare. These challenges could make it difficult for PINC to grow its business and maintain its profitability.
Income and cash flows have taken a step down in 2023. Cash flows are projected to continue to decline in 2024 and return to growth in 2025.