Sometimes, Mr. Market Can Be Really Slow To Realize Value......but if you believe in your analysis, you need to hang in there. Don't be stubborn...constantly reevaluate your thesis. I've repeatedly done so on CRHM given that I own it, especially over the past few months, and I keep coming to the same answer: this Company is a bargain. The good news (great Q1 earnings and the addition of a fantastic new CEO) only make me feel better about the Company's prospects.
The fact is that CRHM is the cheapest, high-quality company that I see out there at any market cap level today. As a reminder, the Company is consolidating the anesthesiology space in the United States and has access to low cost financing (L+2.5%) from JP Morgan, among others, to go buy practices at low to mid single digit multiples of FCF. At USD$3.00/share, you're buying CRH at ~7x levered FCF before giving any credit for planned M&A this year. Including management's guidance, you're buying CRH at ~6x pro forma levered FCF. Organic growth is in the low single digits, but through M&A, the Company can grow earnings at least in the mid-teens per year.
Additionally, the new CEO, Dr. Tushar Ramani, has one of the best pedigrees that I've ever seen for a microcap CEO. He built his own anesthesiology practice in the early 2000s with an investment from Summit Partners, then sold his business to TeamHealth, a healthcare company owned by Blackstone. He has been part of Summit's Executive-in-Residence program, helping them to identify new investment opportunities in the healthcare space. His relationships with both of these PE firms increase the probability in my mind of an eventual sale of the Company to a financial buyer. I'm hoping that's not in the near term, however, as the Company has plenty of runway to grow.
One other key point: Ramani hinted on the earnings call that CRH will also begin looking at M&A outside of GI-related anesthesia to speed up their growth. For some of the naysayers on this board who have expressed concern about CRH due to Cologuard, I think this move by the Company should help alleviate what I already think to be a relatively low risk.
When I see the facts and analysis above, it makes it far easier for me to hold on to CRHM in the fact of continued silliness by Mr. Market. As usual, do your own research, but I know that mine continues to make me quite comfortable holding the stock.