Premier Health of America Inc (TSXV: PHA) is a Canadian Health technology company that provides a comprehensive range of staffing and outsourced services solutions for healthcare needs to governments, corporations, and individuals through its proprietary platform.

Why should Investors make an EXIT? 

• Lower margin profile v/s Industry: In Q4 2021, the company failed on maintaining its pace and witnessed lower performance under operating margin matrix, consisting of gross margin, EBITDA margin, operating margin and net margin, which exhibits the extreme pressure on the company.

Source: REFINITIV, Analysis by Kalkine Group

• Higher average collection period: PHA is having a higher average Accounts Receivable day of 58.1 days, against the industry median of 44.4 days. A higher average collection period indicates that the organization is collecting its payments at a slower pace. This may create a difficulty for the company to have enough cash on hand to meet their financial obligations.

• Long cash cycle days: The company’s Cash Cycle (Days) has increased compared to the previous sequential quarters, implying the company is taking more days to convert its inventory to cash. In Q4 2021, its Cash Cycle stood at 51.8 days against 45.3 days in Q3 2021. Also compared to industry median its very high, which is at 32.4 days only.
  

Valuation Methodology (Illustrative): EV to EBITDA

Analysis by Kalkine Group 

Stock recommendation

The firm is quickly developing organically and via acquisitions to maintain its growth trajectory. The Code Bleu and Solution Nursing acquisitions accounted for most of the revenue and EBITDA growth in FY 2021, had a significant impact on sales, which increased to CAD 66.6 million from CAD 20.7 million in the previous period. It also had a significant growth in its bottom line, which is a significant advantage. However, its margin profile is on the lower end of the industry, indicating that it is under pressure. Also, the group is slightly leveraged, implying higher balance sheet risks. Moreover, it also has a prolonged Cash Cycle (Days), which may create a difficulty for the company to have enough cash on hand to meet their financial obligations. Hence, based on the above rationales and valuation, we recommend a “Sell” rating on the stock at the closing price of CAD 0.83 on January 27, 2022.

One-Year Technical Price Chart (as on January 27, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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