Chardan: R1 RCM Will Make A Full Recovery

Even as it reflects on 56-percent year-over-year gains, R1 RCM Inc RCM has struck an “attractive inflection point,” according to Chardan Capital Markets.

The Rating

Analyst Steven Wardell initiated coverage on R1 RCM with a Buy rating and a $17 price target.

The Thesis

Chardan expects superior top-line growth in RCM relative to peers, particularly given the firm’s high recurring revenue rate and recent expansion beyond its core Ascension business.

“We like the company’s ability to boost hospital economics in ways that are strong compared to revenue cycle competitors,” Wardell wrote in a Tuesday note.

He regards RCM as a leading revenue-cycle-management vendor in the U.S. hospital market and expects continued growth as macro trends favor increased software and service outsourcing. Chardan’s channel checks indicate a shift in hospital budgets toward revenue-cycle-management services previously done in-house.

In these circumstances, Wardell sees a $100 billion market with 12-percent growth.

“The Street sees R1 RCM as a fallen angel in the middle of a turnaround,” Wardell wrote. “We look positively on the turnaround and see the opportunity for multiple expansion in the stock in the next 12 months.”

Price Action

At time of publication, R1 RCM shares were up 4.5 percent at $10.43.

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