$PINC Punished for Lack of Working Capital?Premier health seems to be flashing some hands off signals at the moment.Based on an analysis of earnings against potential growth, fair value for NASDAQ:PINC would be around $40.38, but the stock is trading 54% below that target. They are even trading below the average analyst target of $33.40. These are signs that something is weighing on the market value of the firm.
Potential Issues for Investors Include:
1. Cash to Equity at 4%: This suggests that the company has an insufficient amount of cash to fuel growth and handle liabilities. I would direct investor attention to the company's negative working capital and 20% drop in operating cash flows.
2. Shareholder Dilution: Premier seems to be constantly issuing new shares, which negates any market value that could be had from an increase in earnings.
3. Net Cash Negative: Total debt held by the company is down trailing 12 months, but still leaves the company with -$3.31 net cash per share over that same time period.
Key Point: The company is over leveraged amidst tight financial conditions and margins in the healthcare space are dropping like a hot rock. This draws concern as the company has been working with negative working capital for 5 straight years.
To mention a few bright spots, the company generating $84 in free cash flow for every $100 in earnings and seems to at least over the past 12 months be looking to reduce their debt. The company is projected to see earnings growth of 5.6% over the next 5 years, but is priced for no growth.
Investors who look at this as a mispricing and buy today could see a push toward our forward looking valuations. This could yield as much as a 55% increase in the stock price. On the other hand the key question would be; can the company survive long enough to fix the problems?
Investors who believe they will survive can look at this as a reasonable opportunity to buy ahead of any capital appreciation.
Earnings are steady over the long term with over 4,400 member hospitals in their circle which should keep the money coming in.
Worst case scenario, they become an acquisition target down the line, but in the mean time, I the market is sending signals that hands off is the policy.
No growth value is definitely an enticing price point, but maybe a look at next quarter's earnings could provide more insight on the company's direction.
PINC faces increased competition from other healthcare improvement companies, such as Optum and UnitedHealth Group. These companies are investing heavily in new technologies and solutions, which could put pressure on PINC's margins.
PINC also faces a number of regulatory challenges, such as the implementation of the Affordable Care Act and the rising cost of healthcare. These challenges could make it difficult for PINC to grow its business and maintain its profitability.
Income and cash flows have taken a step down in 2023. Cash flows are projected to continue to decline in 2024 and return to growth in 2025.
PINC trade ideas
PINC Swing Trade IdeaPremier, Inc. is a healthcare improvement company. The Company is uniting an alliance of approximately 4,000 United States hospitals and health systems and approximately 175,000 other providers and organizations to transform healthcare. The Company operates through two reportable business segments: Supply Chain Services and Performance Services. Its Supply Chain Services segment operates healthcare group purchasing organizations (GPO) and direct sourcing activities. The Company's performance Service segment provides integrated data and analytics, software as a service (SaaS) informatic products, consulting services, performance improvement collaborative, government services and insurance management services. The Company plays a role in the healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide.
$PINC Has A Double Bottom At $28On one of the market's worst days, $PINC traded off the lows and actually closed slightly higher on the day. Looking at the strong support at $28, we believe $PINC is a smart play during these turbulent times.
$PINC is also incredibly cheap trading at just 10x this year's earnings and a low PEG of just 0.44.
Premier, Inc., together with its subsidiaries, operates as a healthcare improvement company in the United States. It operates through two segments, Supply Chain Services and Performance Services. The Supply Chain Services segment offers its members with access to a range of products and services, including medical and surgical products, pharmaceuticals, laboratory supplies, capital equipment, information technology, facilities and construction, and food and nutritional products, as well as purchased services, such as clinical engineering and document shredding services. It is also involved in the provision of the ASCEND Collaborative service for members to receive group purchasing programs, tiers, and prices, as well as managed services; SURPASS Collaborative service; STOCKD, an e-commerce platform; and PROVIDEGX program, which identifies supply sources for drugs that are on or may be at risk of being added to the national drug shortage list, or that are vulnerable to pricing volatility, as well as direct sourcing business. The Performance Services segment offers PremierConnect for members to address existing cost and quality imperatives, enable them manage a value-based care reimbursement model, and support their regulatory reporting framework; performance improvement collaborative; and consulting and insurance services. This segment's various PremierConnect domains include PremierConnect Quality & Regulatory, PremierConnect Clinical Surveillance & Safety, PremierConnect Supply Chain & ERP, PremierConnect Operations, PremierConnect Enterprise Analytics, and PREMIERCONNECT Clinical Decision Support domains. Premier, Inc. has a collaboration with GE Healthcare to develop a same-day breast cancer diagnosis and treatment model. The company was incorporated in 2013 and is headquartered in Charlotte, North Carolina.
As always, trade with caution.
Good luck to all!
PINC - H&S formation short from current level to $27.57PINC seems forming a H&S formation. It is breaking down nicely and Twiggs money flow following it nicely. It seems a very good opportunity however be aware of the risk as Earnings After market Monday.
* Trade Criteria *
Date First Found- May 6, 2018
Pattern/Why- H&S formation
Entry Criteria- Possible short here
Exit Criteria- $27.57
Stop Loss Criteria- $34.13
Indicator Notes- Twiggs money flow going down nicely.
Please check back for Trade updates. (Note: Trade update is little delayed here.)