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On Tuesday, Evercore ISI adjusted its stance on R1 RCM Inc (NASDAQ:), a leading provider of technology-enabled revenue cycle management services for healthcare providers, moving its rating from Outperform to In Line. The firm also increased its price target for the company’s shares to $16.00, up from the previous $12.00.
The downgrade comes despite a positive view of the company’s performance, with R1 RCM having an “exciting week” and a strong year in 2023. The analyst at Evercore ISI acknowledged the detailed 2024 guidance provided by R1 RCM’s management, which includes various factors such as customer attrition, acquisition ramp, and synergies. The guidance was seen as reasonable and commendable for its level of detail.
In light of the updated guidance, Evercore ISI has revised its estimates for R1 RCM. The firm has removed the Sutter Phase 2 from its estimates until further clarity is provided regarding the go-forward agreement. The analyst anticipates R1 RCM to continue as a high single-digit to low double-digit organic grower, with potential for growth in EBITDA in the teens as the company benefits from increased profitability at customers and additional synergies.
Despite the positive growth outlook, Evercore ISI has decided to adopt a more neutral position, citing the recent increase in valuation. The firm believes that the current share price now reflects a balanced risk/reward profile for investors, prompting the shift to an In Line rating.
The new price target of $16 is based on an 11x multiple of the projected 2025 EBITDA, as per the analyst’s comments. This adjustment reflects a recognition of the company’s future earnings potential while also accounting for the current market valuation.
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This story originally appeared on Investing
