R1 RCM Inc Bucks Tech Sell-Off; up 125% Since March

rcm stockR1 RCM Inc Stock Soars 125% Since March

R1 RCM Inc (NASDAQ:RCM) is a medical tech stock we’ve been following for a while now. It’s the perfect example of an under-the-radar growth stock with huge potential.

But R1 RCM investors already know this. Over the last 12 months, R1 RCM stock has climbed 33%; it’s up 23.1% year-to-date.

Most impressively, at a time when the broader markets are taking a beating, especially tech stocks, RCM stock just hit a new 52-week high of $16.00. That represents a 125% gain since bottoming in March.

Thanks to solid second-quarter results, which saw RCM swing to second-quarter profitability and strong guidance, this growth trajectory could continue over the coming quarters.



Chart courtesy of StockCharts.com

RCM Stock Overview

R1 RCM Inc provides revenue cycle management (RCM) and physician advisory services to hospitals, healthcare systems, and physician groups.

Or, put another way, RCM is one of the country’s largest medical debt collection companies. (Source: “About Us,” R1 RCM Inc, last accessed September 10, 2020.)

R1 RCM Inc also provides physician advisory services that help hospitals comply with payer requirements for billing purposes, practice management services, and revenue capture services.

The Chicago-based company serves healthcare providers, including hospitals, physician groups, emergency medical service providers, homecare providers, hospices, and palliative care providers, as well as durable medical equipment and infusion therapy businesses.

RCM has more than 750 clients across the U.S. and serves more than 27,000 providers, processing more than 30 million patient/clinical engagements each and every year.

While COVID-19 has seen many tech stocks sideline their operations, RCM has done the opposite. Over the last number of months, RCM has launched a new products and completed or announced a number of strategic acquisitions.

In April, the company completed the acquisition of SCI Solutions, Inc., a leading provider of Software as a Service (SaaS) based scheduling and patient access technology, for $190.0 million in cash. (Source: “R1 Completes Acquisition of SCI Solutions,” R1 RCM Inc, April 1, 2002.)

In early August, RCM announced it had completed the acquisition of Cerner RevWorks. The acquisition is expected to enhance R1 RCMs revenue cycle capabilities and expertise to clients. (Source: “R1 Completes Acquisition of RevWorks,” R1 RCM Inc, August 3, 2020.)

Swings to Q2 Profitability of $15.1 Million

On August 4, R1 RCM Inc announced that revenue for the second quarter ended June 30, 2020 had increased 6.7% year-over-year to $314.7 million. (Source: “R1 RCM Reports Second Quarter 2020 Results,” R1 RCM Inc, August 4, 2020.)

The company reported second-quarter net income of $15.1 million, or $0.03 per share. In the second quarter of 2019, R1 RCM Inc reported a net loss of $5.2 million, or a loss of $0.09 per share. Second-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $65.3 million. This was a 61% increase over adjusted EBITDA of $40.6 million in the same prior-year period.

Rachel Wilson, R1 RCM Inc’s CFO and treasurer, commented, “Our second quarter results demonstrate our team’s commitment to successfully navigate the challenges presented by COVID-19 through disciplined overhead cost reduction while supporting growth. With the recovery in patient volumes experienced to date and the visibility in our business model, we are pleased to re-introduce 2020 financial guidance.”

RCM’s Business Outlook

For fiscal 2020, RCM expects to report:

  • Total revenue of between $1.22 billion and $1.25 billion, for year-over-year growth of 4.6%
  • Adjusted EBITDA of $230.0 million to $240.0 million, representing year-over-year growth of 40%

Analyst Take

R1 RCM Inc is a leader in the $100.0-billion acute care and physician revenue cycle market. R1 RCM stock has great momentum, up 19.5% year-to-date, but there is every reason to believe the company can generate significant double-digit returns.

Thanks to solid second-quarter financial results and a strong outlook, the company was able to erase all of the losses associated with the coronavirus-fueled sell-off in March, and soar to new record highs.