PINC - Embedded Expectations Analysis - 2020 12 22
Premier, Inc. (PINC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with an 11.7x 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 hospitalization rates, technology agreements, and Contigo 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 sustain hospitalization rates, manage their supply chain, and secure new technology agreements. Management may also have concerns about their ability to sustain strong technology services growth, the potential of their Hospital Housekeeping Systems (HHS) partnership, and their current PPE inventory levels. Moreover, they may lack confidence in their ability to expand to adjacent markets through Contigo and secure approval for Contigo procedures. They may also be exaggerating their progress of the co-investment with Prestige Ameritech, and they may lack confidence in their ability to normalize PPE pricing levels and continue expanding their member spend capture
Although management's concerns about their hospitalization rates, technology agreements, and Contigo, suggest the potential for near-term headwinds, market expectations are too bearish given the firm's strategic expansion strategy and strong market position. As such, 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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