It is that time of year when I look at companies from different valuation points and compare them to industry averages for the past calendar year. For this purpose, I've looked at US companies for comparative purposes because there are simply many more companies to get better, more accurate averages.
In the healthcare services segment, the average enterprise value to ebitda is 12.16 times. If we look at all companies, including negative ebitda companies, then the average is 14.52. I will use the first number for this analysis.
Premier Health of America has achieved ebitda of $5,760,059 over the last twelve months (ttm)
Its net debt is $16,715,410 and its market cap is around
$23,899,423
Ebitda can fluctuate significantly for these smaller companies but I'm confident we will see higher numbers over the next 12 months which is the right way we should be looking at valuations. Nonetheless, I will be conservative and use the past 12 months instead.
Applying a 12.16 multiple to $5,760,059 I get an enterprise value of $ 70,042,317.4
Subtract the $16,715,410 net debt gives us a market cap of
$53,326,907.4
There are about 56,137,953 shares outstanding
The fair value using only this * one metric * only is
approximately 95 cents per share!
One can make similar comparisons using a variety of other metrics such as price to sales, price to book value, and comparing them with industry averages. One Caveat about this analysis is that it uses relative valuation as a guide for where shares should be trading at. I haven't looked at absolute valuations but that's probably going to be another post. Finally, what if Premier Health achieves forward ebitda over $8m? What would be the fair value?
That's about it for now. I think it's fair to say Premier Health has a significant margin of safety and an excellent long term play!