Tabula Rasa HealthCare
(TRHC - Free Report
) is a $1.35 billion medical IT firm focused on patient-specific, data-driven technology and solutions which enable healthcare organizations to optimize medication regimens to improve patient outcomes, reduce hospitalizations, lower healthcare costs and manage risk.
The company's cloud-based software applications, including platforms EireneRx and MedWise Advisor, deliver control and certainty to payers, providers and other healthcare organizations. And their innovative use of artificial intelligence technologies and cross-provider integrations for doctors and pharmacies to cross-reference prescription complications is becoming more important in an aging population taking more medicines.
I last wrote about Tabula Rasa in early May after we were buyers of the stock in the low $50s. I saw incredible value in this innovative provider of key pharmacological technology to the healthcare system -- especially with sales growth of over 40% to $285 million this year.
Here's what I wrote in May...
Below is a snapshot I took last month (April) when I bought TRHC shares for the Zacks Healthcare Innovators portfolio. This view highlights projected sales growth in the face of the recent valuation haircut.
What you are seeing is 12-month forward sales estimates (the green line) rising from $210 million at the start of Q3 2018 to over $325 million projected into 2020, while price has dropped from $90 to $55...
Part of the pessimism is that while the company became profitable last year, it is expected to show no EPS growth this year and deliver a repeat of $0.77 giving it a P/E multiple of over 70X. And this after analysts held loftier expectations about 2019 growth as recently as last October when the consensus was for EPS of over $1.10.
Gargantuan Surprise and Growth on the Rise
After TRHC's Q1 earnings report on May 8, there was more confusion among analysts about the outlook and when certain acquisitions would be accretive. Full year 2019 EPS consensus plunged to $0.47, even with a relatively big beat of 10-cents vs 6-cents.
Shares also kept falling during the May stock market slide, all the way to a new 52-week low near $41. And that's where I was a buyer again for another portfolio, this time my Zacks TAZR Trader where I encouraged my members to be buying under $45.
Then on August 8, Tabula Rasa Healthcare delivered Q2 earnings of $0.35 per share, beating the Zacks Consensus Estimate of $0.05 per share by 600%. This giant positive surprise, along with raised guidance and updates on key initiatives and innovations, sent shares flying all the way to $68 and giant volume of over 1 million shares (3X the average).
The Zacks EPS Consensus for 2019 was restored and now sits at $0.82, representing just 6.5% annual growth. But 2020 estimates rose from $0.97 to $1.13, for a 38.7% advance.
And management raised their 2019 revenue view to $283M-$293M from $280M-$290M. From this, consensus moved up from $287M to $289.25M for 41.6% topline growth.
Innovation and Partnership Updates
Last week, Tabula Rasa HealthCare announced a partnership between its precision dosing software subsidiary DoseMe and Bainbridge Health Partners, a Children's Hospital of Philadelphia spin-off. Bainbridge Health provides clinical solutions based on more than a decade of research and development, including the Med O.S® medication safety and stewardship platform that reduces the risk of medication errors and waste. The partnership will leverage Bainbridge Health's Med O.S® platform to further enhance medication safety and reduce costs across DoseMe's partner hospitals.
And two weeks ago, Tabula Rasa HealthCare announced a new offering of Comprehensive Medication Review (CMR) opportunities to community pharmacists through the collaboration of two of its subsidiary companies, SinfoniaRx and PrescribeWellness.
Community pharmacists now will have the opportunity to conduct face-to-face CMRs with their patients and receive compensation for additional clinical services. The collaboration between SRx, the largest provider of telephonic CMRs, and PW, one of the largest networks of community pharmacies, benefits patients, their pharmacists and their health plans.
For patients, there is an increased access to telephonic or in-person consultations. For pharmacists, the CMRs can be quickly and accurately documented as eCare Plans within the Patient Engagement Center using PrescribeCare, as they review all of a patient's medications to help determine the efficacy of each medication prescribed. For payors, more eligible members will complete a CMR to ensure they are receiving optimized care.
Bottom line: Buy the dips in TRHC and let's see if the stock can continue its rebound toward analyst targets as high as $90. And as I write this on Monday August 25, TRHC shares have done something notable: after continuing last week's market slide, they dipped to $59, closing the gap up from Aug 9, and ended +2.63% as they got back above $62.
Disclosure: I sold my TRHC positions in Healthcare Innovators and TAZR Trader, but may initiate a new long position at any time.
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