PINC - Embedded Expectations Analysis - 2018 11 28
Premier, Inc. (PINC:USA) currently trades below corporate averages relative toUAFRS-based (Uniform) Earnings, with a 13.5x Uniform P/E. At these levels, the market is pricing in expectations for the firm to see historically low profitability, but management is confident about Stanson, fees, and revenues. As such, longer-term equity upside remains warranted
Specifically, management is confident that their acquisition of Stanson Health will improve their intelligent clinical decision support technology, and that 25% to 30% of their net administrative fee revenue comes from nonacute-related facilities. Additionally, they are confident that their new revenue recognition standard resulted in the attribution of some revenue to prior periods, and that year-over-year performance comparisons will continue to be impacted through fiscal 2019 as a result. They are also confident that one of the benefits of the new revenue recognition standard is that periodic variability shouldn't exist going forward, resulting in much more normalized growth
Given management's positive sentiment, market expectations for Uniform ROA compression appear far too bearish, and as such, multiple expansion and equity upside continue to be warranted
Premier is a holding company. The company, together with its subsidiaries and affiliates, is a healthcare performance improvement company. The company provides technology-enabled platform that provides supply chain services, clinical, financial, operational and value based care software-as-a-service informatics products, consulting services and performance improvement collaborative programs. The company has two business segments: Supply Chain Services, which assists its members in managing their non-labor expense and capital spend through a combination of products, services and technologies; and Performance Services, which provides information technology analytics and workflow automation and consulting services.
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