1. Press Ganey provides measurement and performance analysis for healthcare organizations. This is a good field: health care+ big data.
2. It has 30 years of experience. This is good. Oohhh it serves 62% of acutre care hospitals and most large hospitals. Annual retention rate is 94%!
3. National Health Expenditures data reported by the Centers for Medicare & Medicaid Services, or CMS, the United States spent $2.9 trillion on healthcare in 2013, accounting for nearly 18% of GDP
4. Most comprehensive patient data base! Yup, the reason why Google is so great.
5. Emerging growth company..PE backed. Net income margin is low.
6.Ugh Adjusted EBITDA says capital structure is irrelevant to operations. Really? If you are highly in debt, you will surely cut costs and raise prices...
7. Weak internal controls~Yes, heavily indebted.
8. Nice revenue recognition policy, billed 50% upon execution. Combined with 94% retention rate, which 100% billed upon renewal. Love the fact cash comes in first.
9. 50% of asset is goodwill and they have 6 million in cash, if they don't get paid, the interest cannot be paid. Whoa! This is really tight.
10. Lot of acquisitions. This would be a big risk given funky things happen during acquisitions and synergies are overrated but in case of buying data, it is actually quite a synergy. Once you build a large proprietary data base, the return to scale, increases, just look at Google.
Assessment:
Pros: With such consumer capture and valuable data. it can easily be an acquisition target. The firm can pay make the interest payments and regulatory risk seems low given how slow the US reforms healthcare.
Cons: Huge goodwill and debt, and low cash....if there is a liquidity shock, this firm will clearly be in distress.
I think it would be a relatively safe play to invest in the firm given its strong revenue generation. There is a high likelihood that a larger analytic firm may buy the firm given its data and technologies.
*From Floating Forests
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