Premier Health: A Valuation Comparison

It appears that the telemedicine space is growing in terms of listed issuers as the technology continues to develop. The recent initial public offering of One Medical (NASDAQ: ONEM), a primary healthcare provider with a digital focus, has provided us yet another comparable for that of Premier Health Group Inc (CSE: PHGI) along with that of competitor Well Health Technologies (TSX: WELL).

As has become commonplace among IPO’s on the US big board exchanges, the new issuer appears to be quite overvalued relative to its peers based on its current performance. One Medical, while it may present larger revenue figures compared to that of some of its peers, appears to be priced in excess of the going market rate when evaluated upon a number of factors.

While this may be viewed as a negative initially, it presents significant opportunity for that of its Canadian listed peers and bodes well particularly for Premier Health Group whom appears to be undervalued relative to its peers based upon company provided revenue, EBITDA, and margin guidance.

With One Medical being a newly listed issuer, analyst data in terms of revenue and EBITDA projections is extremely scarce. However, we can analyze the current valuation of a number of Premier Health’s peers based on projections sourced via an Eight Capital analyst report and using company provided guidance for the upcoming fiscal years.

Enterprise
Value ($M)
EV/Sales
CY2019e
EV/Sales
CY2020e
EV/EBITDA
CY2019e
EV/EBITDA
CY2020e
One Medical$3,1179.0xn/an/an/a
Teledoc Health$7,67514.1x11.3x264.7x116.3x
Well Health Tech$2167.0x3.9xn/a216.6x
Premier Health$403.5x1.8x73.2x10.2x

In terms of its enterprise value, all of the above ratio’s determine that the company is undervalued relative to peers when utilizing company provided projections and guidance. This includes both the enterprise value to sales ratio, as well as the enterprise value to EBITDA ratio.

For instance, Premier Health is currently trading at just a fraction of the multiple that has been assigned to Teladoc Health based on the estimated 2020 EV/Sales ratio. Premier’s current ratio of 1.8x is just 16% of that of Teladoc’s ratio, and just 46% of that of Well Health’s current multiple. A comparison to One Medical isn’t currently available as a result of a lack of current analyst coverage due to being a new issue.

It should also be noted above the premium which is lent to both firms which are listed on the US big boards relative to that of their Canadian counterparts.

In the case of Premier Health, the company is guiding towards a steady incline in gross revenues, as well as EBITDA and EBITDA margin which makes it further undervalued on a long term horizon. With respect to revenues, the firm aniticpates its run rate to improve from $11.5 million in 2019, to that of $22.7 million in the current calendar year, increasing on a steady trajectory towards $57.0 million by the end of 2022.

The implication of such a steep revenue projection, is that the enterprise value to sales estimate ratio significantly decreases as the time horizon increases. The same also applies to the companies long term outlook on the basis of enterprise value to EBITDA. The development of this multiple can graphically be seen below.

While this long term decrease in multiples cannot be easily compared to that of competitors due to a lack of long term guidance from peers, it presents an interesting glimpse into Premier Health’s management expectations. Should the company prove to have a solid grasp on long term performance of the company as well as growth expectations, the current trajectory could prove quite fruitful for the company. As the adoption of telemedicine and software continues within the healthcare industry, Premier Health could prove to be a leader in the segment due to its early position within the niche.

Premier Health last traded at $0.43 on the CSE.


FULL DISCLOSURE: Premier Health Group is a client of Canacom Group, the parent company of The Deep Dive. The author has been compensated to cover Premier Health Group on The Deep Dive, with The Deep Dive having full editorial control. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security.

Jay

As the founder of The Deep Dive, Jay is focused on all aspects of the firm. This includes operations, as well as acting as the primary writer for The Deep Dive's stock analysis. In addition to The Deep Dive, Jay performs freelance writing for a number of firms and has been published on Stockhouse.com and CannaInvestor Magazine among others.

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