(By Balaseshan) UBS Securities analyst Stephen Shankman upgraded his rating on shares of MedAssets Inc. (NASDAQ:MDAS), which provides technology-enabled products and services, to "Buy" from "Neutral" and increased his price target to $18 from $14.
In Shankman's view, MDAS' RCM segment is set up to outperform in 2012 (versus guidance) and RCM growth should accelerate over the next few years. He believes MDAS would benefit from increasing demand for RCM (including consulting) leveraged by recent internal operational changes.
As such, the analyst sees the combination of accelerating momentum in the RCM segment combined with ongoing solid SCM execution helping drive the price-to-earnings multiple toward his about 15% long-term EPS growth rate. The largest RCM-focused industry conference (HFMA-ANI) takes place next week in Las Vegas.
While Shankman does not anticipate any major announcements from MDAS, given the focus around both clinicals and financials at HIMSS, he expects to hear a positive tone at HFMA around the RCM industry and MedAssets' strong technology. MDAS may also indirectly benefit from the AH investigation.
In mid-February press reports suggested MDAS was exploring LBO options and in mid-April it was reported that it was no longer actively pursuing an LBO. If such a situation were to re-occur, Shankman believes MDAS could fetch $17-$19/share in an LBO valuation, which corresponds to about 11 times EBITDA / about 17 times price-to-earnings multiples.
The brokerage raised its 2013 EPS estimate for MedAssets to $1.23 from $1.22, while maintaining its 2012 estimate of $1.08.
MDAS is trading up 0.15% at $12.74 on Thursday.