PINC - Embedded Expectations Analysis - 2020 10 01
Premier, Inc. (PINC:USA) currently trades near recent averages relative to UAFRS-based (Uniform) earnings, with an 11.9x 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 their value proposition strategy, members, and the Supply Chain Services segment suggest the potential for near-term headwinds, market expectations are too bearish, and longer-term equity outperformance is likely warrantedSpecifically, management may lack confidence in their ability to execute their value proposition strategy, sustain revenue growth, and achieve the multi-year growth guidance starting 2022. In addition, they may have concerns about the terms of new member contracts and their members' ability to resume delayed elective procedures and services. Moreover, management may lack confidence in their ability to keep growing their member base, address product demand of member health systems and providers, and mitigate Supply Chain Services revenue declines. Furthermore, they may be exaggerating Supply Chain Services cost savings, the capabilities of the Contigo Health business, and their close relationship with members
Although management's concerns about their value proposition strategy, members, and the Supply Chain Services segment suggest the potential for near-term headwinds, market expectations are too bearish given the firm's strategic expansion strategy and strong market position, 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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