PINC - Embedded Expectations Analysis - 2019 06 28
Premier Inc. (PINC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 11.7x Uniform P/E. At these levels, the market is pricing in expectations for the firm to see historically low profitability, but management is confident in their diligent portfolio management and ability to adapt to changing market conditions.Specifically, management is confident in their ability to preserve a strong foundation with a rigorous asset review and diligent expense management, and that their regular evaluation of their portfolio ensures they are well positioned for growth. Also, they are confident in their ability to adapt to market changes and that the EBITDA and cash flow impact of their exit from the specialty pharmacy business is immaterial.
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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