Providence Service Corporation: Underfollowed, Undervalued Medical Transportation Play

Aug. 17, 2017 10:54 AM ETModivCare Inc. (MODV)4 Comments
Boris Marjanovic profile picture
Boris Marjanovic


  • Providence is poised to deliver low- to mid-teens revenue growth on the back of increasing medical transportation demand and acquisitions.
  • Profits should grow even faster as margins expand, thanks to various cost saving initiatives currently being implemented.
  • The company’s shares currently offer a very attractive risk/award opportunity with 45+% upside potential over the next 12-24 months.

Benjamin Franklin once said, “In this world nothing can be certain, except death and taxes.” If Ben were alive today, he’d probably add a third certainty to his list: rising healthcare costs. Indeed, despite decades of efforts to control costs, spending on healthcare continues to increase, almost exponentially. And there’s no indication that this trend will reverse for the foreseeable future. One of the few publicly traded companies doing something to combat this very serious problem is Providence Service Corporation (PRSC).


Providence operates via two segments. A little over 80% of its revenue comes from non-emergency medical transportation (or NEMT), while the balance of revenue comes from workforce development (or WD). This report will primarily focus on the core NEMT segment.

Providence is the largest provider of low cost non-emergency medical transportation in the US. It provides over 190,000 trips per day – 70 million trips per year – to over 26 million riders in 39 states plus DC. These riders are primarily disabled or poor Medicaid/Medicare recipients who need to get to and from medical services, but have no means of transportation.

The economics of this business are very attractive for three reasons:

  • First, it’s asset-light and scalable. Unlike a traditional NEMT company, Providence doesn’t own any vehicles and outsources the actual transportation to local cab, van, and ambulance companies. Its role is to process calls, handle billing, supervise the service quality, etc. This is essentially the same business model employed by Uber.
  • Second, competition is generally weak. Economies of scale allow Providence to be very competitive pricewise, preventing most competitors from underbidding it on a contract. This is a key reason why its customer/contract retention rate exceeds 90%.
  • Third, revenue is highly predictable. Around 80% of Providence’s NEMT contracts are capitated, meaning it gets paid a set rate rather than on

This article was written by

Boris Marjanovic profile picture
Cofounded Uvidyne, which provides financial modeling services to small, medium, and large businesses.

Disclosure: I am/we are long PRSC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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