P3 Health Stock Could Be A Good Play Eventually (NASDAQ:PIII)

The Funding Thesis

P3 Well being Companions Inc (NASDAQ:PIII) is a small patient-centered firm based mostly in Henderson, Nevada. Being centered on the affected person they provide excellent care providers in comparison with many different corporations within the nation. A lot of the owned amenities are clinics and wellness facilities. With such a distinct segment product and providing they have a tendency to draw individuals with just a little bit more cash to spend relating to healthcare.

P3 Well being Companions has seen improve in revenues and the longer term appears vivid. However till the corporate has a optimistic backside line, I’ll keep a maintain on the corporate.

Final Earnings Report Highlights

Within the newest earnings report, P3 Well being offered buyers with one other robust quarter of progress. The highest line noticed a 59% improve YoY on the again of Medicare Benefit members exceeding 100 000. With revenues at $248 million, there may be clear momentum proper now with the corporate.

However with the next top-line progress, sadly, the underside line has seen a lower as an alternative. The corporate had a internet lack of $65 million within the final quarter, in comparison with $32 million a yr earlier than.

Wanting forward the administration maintains optimistic outlooks and sees revenues coming at over $1 billion which might signify a YoY improve of round 69%. Some feedback have been made on the member complete as nicely and so they keep an outlook that they’ll proceed retaining over 100 000 complete members by the yr’s finish.

The CEO Sherif Abdou continued the pattern of optimism for his or her outlook and stated the next “This progress demonstrates the ability of our healthcare mannequin, as we allow the payors, sufferers, and suppliers to collaborate on the singular mission of higher affected person outcomes”.

Sector Outlook

As P3 is part of the healthcare providers business there’ll kind of all the time be demand for his or her product. Individuals will all the time want well being care and the particular providers that include it. Due to this, the business is predicted to develop round 8.4% every year from 2022 till 2026, topping out at $10 414 billion.

The market is huge and there are many alternatives for corporations prepared to make a push and put money into their enterprise to realize market share. What I believe will probably be crucial for corporations on this sector is retaining manageable working prices. All so as to keep good margins and maintain buyers . Unstable costs can all the time happen, but when corporations can hedge in opposition to it higher then that may make them extra priceless in buyers’ eyes.

Rivals

Within the area that P3 Well being is in there are a variety of opponents to combat off. Some notable I’ve seen are UpHealth (UPH) and Higher Therapeutics (BTTX). These are corporations additionally specializing in offering a persistence satisfying expertise. What could be the competitors right here in my view for P3 Well being Companions is that these corporations would try to transfer into areas the place P3 is working.

However I believe that given the spectacular progress the P3 has seen not too long ago, they’re higher set as much as capitalize on the momentum and set up extra clinics and achieve a bigger buyer base.

None of those corporations are close to being worthwhile but, however I believe that P3 is the one going to be first. That solely made me way more susceptible to go together with that firm as an alternative of what I might describe as wishful considering with the others.

The Stability Sheet

Shifting over to the steadiness sheet for the corporate there are some worrying issues I’ve seen. Firstly, the money place that the corporate holds has seen an nearly 75% lower, going from $140 million to $34 million. I believe it is a huge damaging as within the face of a more difficult financial atmosphere to maneuver in, an enormous money place is a superb cushion to have for an organization. Fortunately P3 Well being would not have any present debt that they should repay. As an alternative, they’ve long-term money owed of $80 million. I believe that if the corporate can come again to earlier ranges of optimistic money flows, then this quantity of debt is nothing to fret about.

By way of property, they’ve fallen similar to the money place has too. However that is due to a goodwill impairment the corporate made in 2022, the place nearly $900 million have been minimize off. Which means that the present ratio between property and liabilities is 3.93 proper now.

With the guide worth, the corporate as they’re buying and selling at a slight low cost proper now. E book worth per share of $1.88 to the share worth of $1.7.

Shares have been fairly closely reducing over the previous couple of years, which is a superb bonus if you happen to have been to be fascinated with investing within the firm. Nevertheless, I would not be stunned if this slows down as extra focus is positioned on constructing a money place and increasing the enterprise to extra areas.

Valuing The Firm

P3 Well being is rising at tempo and it appears that evidently the administration is aware of what they’re doing and retains an optimistic outlook for the corporate. I believe that they’ll be capable to ultimately develop into worthwhile and take increasingly market share.

A p/e of 12 I believe is an affordable a number of as the corporate is new and up and coming and but to show itself on the large stage. Till they keep good free money move and polish up their steadiness sheet much more I’ll maintain this a number of.

Regardless of that, in response to my calculations, an entry on the present costs would offer an excellent return till 2027. However that’s if the corporate manages to develop on the tempo I hope and improve the web margin to the same stage to the sector.

What I believe will probably be essential to have a look at is the quantity of shares being diluted. As the corporate tries to increase in addition they want to boost capital, and I do not suppose free money move will probably be sufficient. Proper now I believe that investing within the firm is a bit too dangerous as they do not actually have a optimistic backside line so the basics are but to be there. However I believe the longer term is vivid for them, and within the case of somebody having shares within the firm, holding on to them is my advice.

Conclusion

P3 Well being Companions is a rising firm that has outlook with a number of amenities anticipated to be opening up earlier than 2024. Proper now, the revenues are anticipated to develop nearly 69% YoY if the outlooks for 2022 are available in response to estimates by the administration.

This provides me hope there may be competent management within the firm proper now. The money place noticed an enormous dip which may fear buyers about debt changing into a problem. However I believe the optimistic money flows the corporate has achieved will assist offset this fear.

In the meanwhile although, I believe a maintain for shares within the firm is the way in which to go. Till there’s a optimistic and regular backside line, I would not make investments cash simply but. It is a small firm and can largely fly beneath the radar for larger funding corporations, so I do not suppose there’s a rush in beginning a place within the firm.