Premier Health of America Inc V.PHA

Trading at 100% free cash flow?

[Torontojay]

Let me go over the company's future prospects. Given the sufficient working capital situation, it's not at all far fetched for Premier to achieve anywhere between $5-10m in free cash flow (excluding acquisition). Most of that would come be collections from accounts receivables plus net income that the company would generate. Now add in an additional $3-5m from this acquisition and it takes us to $8-15m in fcf. This is almost equal to the market cap of the company! Any concerns over the debt situation should subside as they are generating significant cash to cover their interest expense even at higher rates. 

As long as they continue to acquire companies at these cheap multiples then shareholders should see pretty good returns going forward. From a mathematical point of view, they could dilute shareholders with an equity raise and it would still be beneficial to shareholders in the long run.