Health Catalyst: Growth At The Intersection Of Health And Data

Summary

• US healthcare costs have ballooned in recent years, yet at least 25% of that spending is due to general inefficiency.
• Health Catalyst provides a way for healthcare organizations to manage their data and derive analytical insights all within a single platform.
• To date, the company has generated 1,200 documented, customer-verified, clinical, financial, and operational improvements.
• The company trades for P/S ratio of roughly 9.4x revenue. This is a good price for a high-growth technology stock.

I've been doing some due diligence into stocks in the healthcare industry as I feel this industry is ripe for change and disruption. US healthcare costs have ballooned in recent years yet at least 25% of that spending is due to general inefficiency. One such company that tackles this inefficiency through the use of data is Health Catalyst (NASDAQ:HCAT). In this article, I will analyze this company and why I feel the stock could deliver solid returns in the future.

Business Analysis

Just a brief background on the company, Health Catalyst is a provider of a data analytics platform specifically tailored for the healthcare industry. Healthcare organizations are inundated with data from a wide array of different sources ranging from clinical data and patient records to accounting and scheduling data. These data are typically stored in and operate on disparate software systems that don't "talk" to each other. Health Catalyst provides a way for these healthcare organizations to manage their data and derive analytical insights all within a single platform. The company's offering is essentially a platform that collects and integrates data along with a suite of out-of-the-box data models and visualizations and professional services. Like most data-related companies, Health Catalyst has a recurring revenue model that would scale as the company grows.

Competition is fierce in the healthcare solutions space, as the company faces competition from industry-agnostic analytics companies and electronic health record software companies. The main competitive advantage of the company's data platform is that it is geared and built specifically for the healthcare industry. There are industry-specific vocabulary and rules in the healthcare space that make a more general data platform problematic. For example, specific patient records, patient conditions, co-morbidities, and changes in scientific flow are complexities that don't exist outside of healthcare.

Image: Health Catalyst Approach

Analyst’s Disclosure:I am/we are long HCAT. 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.

Caveat emptor! (Buyer beware.) Please do your own proper due diligence on any stock directly or indirectly mentioned in this article. You probably should seek advice from a broker or financial adviser before making any investment decisions. I don't know you or your specific circumstances, therefore, your tolerance and suitability to take risk may differ. This article should be considered general information, and not relied on as a formal investment recommendation.