PINC - Embedded Expectations Analysis - 2021 03 04
Premier, Inc. (PINC:USA) currently trades well below corporate averages relative to UAFRS-based (Uniform) earnings, with an 11.0x 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 sustaining segment revenue growth, GPO fees, and their acquisitions 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 Supply Chain Services and Performance Services revenue growth, mitigate declines in adjusted net income and operational cash flow, and maintain Performance Services segment EBITDA margin. In addition, they may have concerns about further cash collection delays, the pandemic's impact on GPO net administrative fees, and sales volatility in the PPE business. Furthermore, management may lack confidence in their ability to maintain competitive differentiation for health systems, capitalize on technology infrastructure improvement opportunities, and help members navigate pandemicrelated challenges. Moreover, they may be exaggerating the revenue potential of the Yankee Alliance and the benefit of their Conductiv and Stanson acquisitions
Although management's concerns about sustaining segment revenue growth, GPO fees, and their acquisitions suggest the potential for near-term headwinds, market expectations are too bearish given the firm's strategic expansion strategy. 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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