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Premier Inc.: An Undervalued Swan On The Surface Of The Healthcare Industry

Mar. 06, 2021 8:10 AM ETPremier, Inc. (PINC)6 Comments


  • Premier is a $4bn market cap provider of services to the healthcare industry via its Supply Chain Services and Performance Services divisions.
  • Shares currently trade at $33.8 - a discount to recent highs of $38 and 2018 highs of $45.
  • Premier has forecast revenues of ~$1.63bn in fiscal year 2021, up 25% year-on-year, and EPS of ~$2.3.
  • Long-term, management is targeting mid-to-high single digit percentage top line and bottom line growth.
  • My contention is that shares are undervalued by as much as 40% at current price. Premier operates in a tricky space but it is an experienced operator and a decent bet in the current uncertain markets.
  • I do much more than just articles at Haggerston BioHealth: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Investment Thesis

When the stock market is buoyant, investors are often prepared to accept a higher level of risk - for example, by backing a loss making or pre-revenue company - but when trading conditions become adverse, strong fundamentals become more important.

As such, I think that Premier Inc. (NASDAQ:PINC) - a $4bn market cap company focused on providing integrated data services and analytics to the managed healthcare industry - looks like an attractive opportunity in the current bear market.

Premier's shares have traded in a range between $28 and $40 for the best part of 5 years - except a short spike to a price of $46 between August and November 2018 - and currently trade at $32.7 as of this writing.

Premier released its fiscal Q221 results at the beginning of February. Net revenue increased 32% on a GAAP basis, to $422.8m, from $319.6m in the prior year period. Net income fell from $91.6m to $44.9m, but EPS was $0.36 per share versus -$6.88 in the prior year period (owing to an adjustment to redeemable limited partners' capital). The company also declared a quarterly dividend payment of $0.19 per share, for a yield of 2.3% based on current share price.

Long-term, management says it is targeting "multi-year compound annual growth rates in the mid-to-high single digits for consolidated net revenue, adjusted EBITDA, and adjusted earnings per share".

That would indicate that management is targeting increasing revenues to >$2bn per annum by FY25, and a basic DCF analysis therefore suggests that Premier's shares are currently undervalued. The consensus analyst target price for Premier's shares is ~$39.3, but I believe the present day value of Premier's shares is >$45, a premium of >40% to current price.

Things at Premier are not quite as clear cut as they might appear based

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This article was written by

Edmund Ingham profile picture
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I write about Biotech, Pharma and Healthcare stocks and share investment tips. Find me at my marketplace channel, Haggerston BioHealth - model portfolio + 4 exclusive stock tips every week. I'm on twitter @edmundingham

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in PINC over the next 72 hours. 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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