PINC – Management is confident about their capital allocation, revenue, and guidance, 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 9.1x 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 their capital allocation strategy, revenue growth, and commodity products guidance
• Specifically, management is confident they expect 1%-5% revenue growth from administrative fees in FY2020, and they are confident their Audit and Compliance Committee has always been fully independent. Furthermore, they are confident their incremental operating investments will remain consistent throughout FY2020, and they are confident increased uptake for their commodity products would push them to the high end of their guidance. Moreover, they are confident about their commitment to continue returning capital to shareholders through their capital allocation program
• 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.