November 28, 2018

PINC – Management is confident about Stanson Health, fees, and revenue recognition, which coupled with overly bearish market expectations, suggests that upside remains warranted


  • Premier, Inc. (PINC:USA)currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.5x Uniform P/E. At these levels, the market is pricing in expectations for the firm to see historically low profitability, but management is confident about Stanson, fees, and revenues. As such, longer-term equity upside remains warranted
  • Specifically, management is confident that their acquisition of Stanson Health will improve their intelligent clinical decision support technology, and that 25% to 30% of their net administrative fee revenue comes from nonacute-related facilities. Additionally, they are confident that their new revenue recognition standard resulted in the attribution of some revenue to prior periods, and that year-over-year performance comparisons will continue to be impacted through fiscal 2019 as a result. They are also confident that one of the benefits of the new revenue recognition standard is that periodic variability shouldn’t exist going forward, resulting in much more normalized growth
  • Given management’s positive sentiment, market expectations for Uniform ROA compression appear far too bearish, and as such, multiple expansion and equity upside continue to be warranted
To read this Embedded Expectations Analysis report in its entirety, please log into the Valens Research web app. If you don't have an account, you can sign up for the 30-day trial.