PINC - Embedded Expectations Analysis - 2020 05 22
Premier, Inc. (PINC:USA) currently trades below recent averages relative to UAFRS-based (Uniform) earnings, with an 8.1x Uniform P/E. At these levels, the market is pricing in expectations for the firm to see historically low profitability. Although management's concerns about procedure volume, supply chains, and their capabilities suggest the potential for near-term headwinds, market expectations remain far too bearish, and longer-term equity outperformance is likely warrantedSpecifically, management may have concerns about their client hospitals' ability to get elective procedure volume back to normal by Q4, margin pressure in their Supply Chain Services and Performance Services segments, and reduced demand for their Performance Services. In addition, they may lack confidence in their ability to help diversify and relocate domestically the production of PPE and pharmaceutical ingredients, provide coronavirus-related data to health officials, and add coronavirus capabilities to their technology. Moreover, they may be concerned about utilizing alternative supply channels, health systems' ability to implement in-advance inventory planning, and the impact of telehealth on the medical supply market
Although management's concerns about procedure volume, supply chains, and their capabilities suggest the potential for near-term headwinds. Given the firm's strategic expansion strategy and strong market position, market expectations remain far too bearish, and longer-term equity outperformance is likely warranted for PINC
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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