R1 RCM Inc Gains Fueled by Strong Back-to-Back Financials
R1 RCM Inc (NASDAQ:RCM) is not what you’d call a sexy tech stock. The company provides revenue cycle management (RCM) technology and advisory services for healthcare providers throughout the United States. But what it lacks in sizzle, it more than makes up for with strong results and share price gains.
The company serves healthcare providers including health systems and hospitals, physician groups, and municipal and private emergency medical service providers. (Source: “About,” R1 RCM Inc, last accessed May 31, 2019.)
R1 RCM entered 2019 as a penny stock (for the sake of inflation, a penny stock is any equity trading under $10.00 per share). However, in early April, R1 RCM stock broke through a tested resistance level and out of penny-stock territory.
Wall Street’s 12-month high-estimate price forecast for RCM stock is $20.00, which represents a 70% gain from current levels. A more bullish share price forecast of $25.00 would be an over-110% increase.
R1 RCM Stock
|RCM Stock Price Information|
|Market Cap||$1.3 Billion|
|Shares Outstanding||110.5 Million|
|50-Day Moving Average||$11.12|
|200-Day Moving Average||$9.52|
(Source: “R1 RCM Inc. (RCM),” Yahoo! Finance, last accessed May 31, 2019.)
R1 RCM stock has been bullish in 2019, with higher, successive pullbacks.
It entered the year trading at $7.85. Then in April, it broke through a tested resistance level near $11.00. On May 16, the stock hit its 52-week intra-day high of $12.48 for a year-to-date gain of 59%.
The next test is at $12.50, a level that RCM stock hasn’t seen since 2013.
R1 RCM continues to hang on to gains after reporting strong financial results for the fourth quarter of 2018 and first quarter of 2019. At the time of this writing, it was trading at $11.80, for a year-to-date gain of 50%.
Chart courtesy of StockCharts.com
Q1 Revenue Up 87%, Swings to Profitability
On May 9, R1 RCM announced that its first-quarter revenue, for the period ended March 31, 2019, increased 87% year-over-year to $275.9 million. The company reported first-quarter net income of $0.2 million. This is compared to a net loss of $23.3 million in the same period the year prior. (Source: “R1 RCM Reports First Quarter 2019 Results,” R1 RCM Inc, May 9, 2019.)
Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was up significantly at $33.4 million, from $0.3 million in the first quarter of 2018.
At the end of the first quarter, cash and cash equivalents sat at $116.9 million, up 86% from the $62.8 million for the period ended December 31, 2018.
Given its strong start to the year, R1 RCM has increased its guidance for 2019. The company anticipates revenue between $1.15 and $1.25 billion, generally accepted accounting principles (GAAP) operating income between $50.0 and $80.0 million, and adjusted EBITDA of $145.0 to $165.0 million.
R1 RCM Inc continues to impress in 2019. The company’s balance sheet is solid, it continues to add new clients, and it is the largest pure-play company focused exclusively on revenue cycle for the healthcare industry.
And because R1 RCM caters to the American healthcare system, its bottom line won’t get hurt by any tech cold war between the U.S and China.
Looking ahead, the company continues to support strong full-year revenue, GAAP operating income, and adjusted EBITDA growth.
R1 RCM stock has had great momentum in 2019, which should continue into 2020.