Tuesday, RBC Capital maintained its Outperform rating on R1 RCM Inc (NASDAQ: NASDAQ:RCM) with a price target of $19.00.
R1 RCM, a provider of revenue cycle management services, has been under scrutiny due to two recent cybersecurity incidents. "The two recent cyber events first Change and now Ascension ”=do create some NT noise, but we continue to believe underlying fundamentals remain healthy and the ongoing strategic review creates some significant upside optionality," said the analysts.
The analysts also point to the approaching June 13 expiration of the standstill waiver, which has permitted discussions about a possible joint transaction by R1's two private equity owners, as the next potential catalyst for the company.
RBC Capital's analysis indicates that the long-term earnings capability of R1 RCM is currently undervalued. This assessment is supported by an updated EBITDA waterfall analysis, which implies that the business has more robust financial prospects than what is reflected in the market. Furthermore, the firm notes improvements in operational execution.
The analyst also refers to a previous offer from New Mountain Capital to acquire R1 RCM at $13.75 per share, suggesting that the current market price does not fully recognize the company's value. The implication is that the shares have a higher intrinsic value than the initial offer made by the private equity firm.
R1 RCM Inc. has reported first-quarter revenues of $604 million and an adjusted EBITDA of $152 million, despite a cyberattack and a customer bankruptcy. The company's updated outlook for 2024 includes expected revenue between $2.6 billion to $2.64 billion and adjusted EBITDA of $625 million to $650 million.
Analysts from various firms have provided mixed ratings;KeyBanc Capital Markets downgraded the company to "Sector Weight," and Citi Research upgraded R1 RCM to a "Buy" rating. Despite a $9.5 million impact in Q1 due to the Change Healthcare (NASDAQ:CHNG) cybersecurity incident, analysts maintain confidence in R1 RCM's long-term outlook.
InvestingPro Insights
In light of RBC Capital's optimistic outlook for R1 RCM Inc (NASDAQ: RCM), recent data and analysis from InvestingPro offer additional perspectives to consider. The company's market capitalization stands at a solid $5.29 billion, reflecting significant investor interest. Despite a negative P/E ratio over the last twelve months, analysts are forecasting a turnaround, with net income expected to grow this year. This outlook is supported by the fact that two analysts have recently revised their earnings estimates upwards for the upcoming period.
InvestingPro Tips highlight that R1 RCM is predicted to become profitable within the year, a potential inflection point for investors. Additionally, the company's stock is known for low price volatility, which might appeal to investors looking for stability in their portfolio. It's worth noting that R1 RCM does not currently pay dividends, which could influence the investment strategy of income-focused shareholders.
For those interested in deeper analysis, InvestingPro provides further tips on R1 RCM's financial health and market performance. Readers can unlock these insights and benefit from an additional 10% off a yearly or biyearly Pro and Pro+ subscription using the coupon code PRONEWS24. With several additional tips available on InvestingPro, investors can gain a comprehensive understanding of the potential risks and rewards associated with R1 RCM.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.