Credit Suisse Initiates Coverage On Premier Inc At Outperform

Credit Suisse has started coverage of Premier Inc PINC with an Outperform rating and $39 price target, which implies an upside of 21 percent from current levels.

The brokerage expects long-term annual adjusted EPS growth of 10 percent, saying that the healthcare improvement company "will grow by cross-selling new and existing solutions to existing members and attracting new members as well as through acquisitions that enhance these efforts."

Analyst Robert Willoughby noted that the ongoing change in the healthcare competitive landscape should boost demand for Premier's solutions which cut costs and improve clinical outcomes.

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Further, the company's performance services business would benefit from the cross-selling opportunities thanks to Premier's substantial GPO footprint that covers majority of the U.S. hospitals. Moreover, the company could offer quality data analytics services due to its broad membership base.

For FY16, the analyst expects EPS of $1.63 on revenue of $1.166 billion (14.5 percent growth from last year) and FY17 EPS of $1.80 on revenue of $1.282 billion (9.9 percent growth).

On the valuation front, Willoughby said the stock was trading at an EV/EBITDA multiple of 8.5x his CY17forecast, below its average (9.9x) as a public company and the comparable healthcare IT/business services valuation(12.1x).

"Our $39 target price equates to an EV/EBITDA multiple of 10.0x, in-line with its historical average and still well below the peer group," the analyst added.

Shares of Premier closed Thursday's regular trading at $32.31. On Friday, the stock was seen trading at $33.37, up 3.28 percent on the day.

Full ratings data available on Benzinga Pro.