R1 RCM Inc Stock Up 35% in 2019, Provides Strong Full-Year Guidance

R1 RCM Inc Stock Up 35% in 2019, Provides Strong Full-Year Guidance
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R1 RCM Inc, an Overlooked Medical Tech Stock With Huge Potential in 2019

R1 RCM Inc (NASDAQ:RCM) is not the kind of tech company that will hypnotize you with its technology. But the software and services firm has been quietly making strong moves in 2019 and the outlook for the remainder of the year looks solid.

R1 RCM stock is up more than 35% year-to-date and is closing in on an important resistance level near $11.00. Analysts following RCM stock think it will break through that level, with a high 12-month forecast of $20.00. That represents a gain of almost 89% from its current price of around $10.60.

R1 RCM Inc Overview

R1 RCM is a leading provider of revenue cycle management (RCM) and physician advisory services to healthcare providers. The company’s technologies help doctors and hospitals manage their medical-billing processes and navigate the complex American healthcare system. (Source: “About,” R1 RCM Inc, last accessed April 10, 2019.)

The company helps healthcare organizations improve their revenue and cash flow, reduce their operating costs, and enhance their patient experience. This includes managing patient registration, insurance/benefit verification, medical treatment documentation, bill preparation, and fee collection.

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R1 RCM 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.

R1 RCM Stock Information
Market Cap $1.2 billion
Beta 0.49
52-Week Change 47.1%
52-Week High $11.00
52-Week Low $7.10
Shares Outstanding 109.1 million
Float 83.3 million
50-Day Moving Average $9.84
200-Day Moving Average $8.94

(Source: “R1 RCM Inc. (RCM),” Yahoo! Finance, last accessed April 10, 2019.)

Despite the frenetic look of R1 RCM stock’s price action, which made buying on the dips look like a winning formula, the company ended 2018 up 79.8%. The Nasdaq, meanwhile, ended 2018 4.3% in the red.

Thanks to investor optimism and the January effect, RCM stock enjoyed a strong rally in the first quarter of this year, which was also fueled in part by strong fourth-quarter and year-end results and a strong outlook for 2019.

In the middle of March, the company’s share price action formed a golden crossover pattern on the stock chart, with the 50-day moving average crossing over the 200-day moving average.

This is a bullish indicator pointing to additional growth. If R1 RCM stock can break through the $11.00 resistance level, it should climb significantly higher.

Chart courtesy of StockCharts.com

Strong Q4 and 2018 Results

On February 22, R1 RCM announced its 2018 fourth-quarter and full-year financial results.

The company’s fourth-quarter revenue advanced 87.4% year-over-year from $122.6 to $262.9 million. Its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $27.1 million, a 375% increase from the $5.7 million in the same prior-year period. (Source: “R1 RCM Reports Fourth Quarter And Full Year 2018 Results,” R1 RCM Inc, February 22, 2019.)

The company also reported a quarterly net loss of $5.7 million ($0.10 per share), down from a net loss of $40.2 million ($0.44 per share) in the same prior-year period.

R1 RCM’s full-year 2018 revenue was $868.5 million, an increase of $418.7 million (93.1%) from the company’s 2017 revenue. Adjusted EBITDA came in at $57.0 million, an improvement of $52.9 million from the 2017 EBITDA.

The company reported a full-year net loss of $45.3 million, down from the $58.8 million loss in 2017.

“2018 was a pivotal year for the company, evidenced by improvement in our financial performance, new business wins, and our expansion into the physician space in a scalable manner with the acquisition of Intermedix,” said President and CEO Joe Flanagan. (Source: Ibid)

CFO and Treasurer Chris Ricaurte added, “Our financial performance improved materially in 2018, driven by successful onboarding of new customer business.” (Source: Ibid)

For 2019, R1 RCM expects to generate revenue between $1.2 and $1.3 billion. At the midpoint, that represents year-over-year revenue growth of almost 40%. The company also expects to report adjusted EBITDA of between $145.0 and $165.0 million. At the midpoint, that represents a year-over-year gain of more than 170%.

Analyst Take

What makes R1 RCM Inc an attractive long-term stock?

The company is a driving force in the $100.0-billion acute care and physician revenue cycle market, its long-term contracts ensure high recurring revenue, it has a differentiated operating model, and it’s the largest pure-play company focused exclusively on revenue cycle for the healthcare industry.

RCM stock entered 2019 with strong momentum. The transformative actions that the company took in 2018 should help it drive value for investors.