Jehoshaphat Research has taken a short position on Premier Inc, a healthcare services company valued at approximately $2 billion.
The research group has raised concerns about the quality of Premier's earnings and the sustainability of its business model.
According to Jehoshaphat Research, Premier Inc's revenue accounting methods rely heavily on projections of future contract performance, which could lead to inflated revenue recognition if optimistic forecasts are used.
This claim is supported by both interviews with former employees and a quantitative review of the company's financial statements and footnotes.
The analysis suggests a significant discrepancy between Premier's reported Adjusted EBITDA and a "cleaned-up" version that Jehoshaphat Research believes more accurately reflects the company's economic reality. By their estimates, the adjusted figure could be roughly 40% lower than what is currently presented to investors.
Moreover, Jehoshaphat Research points to a potential decline in Premier's free cash flows and suggests that the company's financial health may be compromised as long-term contracts with healthcare systems near expiration, leading to member departures.
The research group also notes significant insider selling and high-level executive departures within the past year, including the CFO, COO, Chairman, and several vice presidents. These actions are interpreted by Jehoshaphat Research as potential indicators of underlying issues within the company.
Jehoshaphat Research expects Premier to potentially lower its guidance or miss earnings estimates in the coming quarters, leading to a contraction of the business and a normalization of its revenue figures.
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