Tabula Rasa (TRHC) is a healthcare service provider with ~25% sustainable growth in recurring revenue, expanding gross margins and a model that is very likely to generate 20% EBITDA margins over the long term.

As you can see from the company snapshot growth is healthy. With 16.1M shares outstanding post-IPO the market capitalization is $241M at $15/share which is the upper end of the proposed price range.

trhc-glance-pic

The core of what TRHC does is prevent nasty drug interactions in patients. There’s a lot to take into account, especially since many patients, especially older ones, can be on over a dozen medications. As more factors are added to the analysis the problem gets harder to manage. It’s no wonder organizations are happy to outsource this to a service provider like TRHC.

trhc-drug-interaction-risk

Given a market capitalization of $240M and probable sales of about $90M this year that’s a P/S ratio of 2.7x. It’s also around 13x normalized adjusted EBITDA. The IPO is already said to be well-subscribed and likely to price at or above the high end of the range. Given the growth, recurring revenue, competitive position and margins we’d see this with a 25x multiple.

We’ve used a new “Quick and Dirty Intrinsic Value QDIV” model to estimate that TRHC could double from the IPO price.

trhc_qdiv

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