Does this margin squeeze from Obamacare really come as a surprise to anyone? This company has been talking about it for a while.
Why does BRLI deserve a higher multiple than LH and DGX? They deserve it largely because they actually have a history of growing in the recent years. Most of it comes from adding new patients, and there’s no sign of that slowing. Revenue per patient will shrink, though and it remains to be seen how that will play out. If you really think there’s no room for growth, then they probably don’t deserve a higher multiple. But I think they have plenty. They’re much smaller than their rivals while still being pretty big and dominant in their geographic area. They can hold their position and whittle into the other two positions. They are already doing this.
Things I like:
-Basically no Options or RSUs (easier to analyze). Many at LH and DGX
-Strong balance sheet
-BRLI tends to grow organically (as opposed to DGX and LH)
-Founder and CEO owns ~10% of the company. Someone is watching the shop.
-They are ~10% of the size of DGX and LH. The market is consolidated and saturated. BRLI can grow both from expected new patients and by whittling business from the other two players.
-They claim no material legal issues (compare that to many at DGX and LH)
-LH has lots of lawsuits, high debt/equity, and a history of making restructuring charges
-DGX is better in these regards, but not great