June 28, 2019
- Premier, Inc. (PINC:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) Earnings, with a 11.7x Uniform P/E. At these levels, the market is pricing in expectations for the firm to see historically low profitability, but management is confident in their diligent portfolio management and ability to adapt to changing market conditions
- Specifically, management is confident in their ability to preserve a strong foundation with a rigorous asset review and diligent expense management, and that their regular evaluation of their portfolio ensures they are well positioned for growth. Also, they are confident in their ability to adapt to market changes and that the EBITDA and cash flow impact of their exit from the specialty pharmacy business is immaterial
- 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.