PFHO overly conservative valuation for q1 2015
Making a number of negative assumptions
Take this q's revenue.
Subtract out 311,000 from MBR revenue customer to probably be lost.
"During the three-month period ended September 30, 2014 MBR fees generated from this customer were approximately $311,000, or 59% of MBR revenue."
therefore will = $215,341
UR revenue was 1,362,283
"During the three-month period ended September 30, 2014 revenue from these overflow services contributed $632,136, or 81%, toward the increase in UR revenues. "
so subtract this and we have $730,147 (assuming it will all eventually be lost when customer has caught up on backlog, could take several quarters, or might continue to exist at some level)
Assume no growth in the following:
HCO, - 260000
MPN - 285415
NCM, - 242,376
Other,- 76,032
So, revenue would be 1,807,025
Expenses (in 000s)
DA 13
+ Bad Debt 15
+Consulting 90 ("We expect increase in consulting fees") from 81
+Salaries 700 (might be reductions in some UR positions but phone call to CEO on Friday revealed they are hiring or have just hired two extra salesmen)
+Insurance 82
+Data 13
+G&A 133
+Outsource Fees 205
("In times when the level of MBR or UR services rendered
increases, we typically experience higher outsource service fees, and when the level of services we render decreases, we typically experience
lower outsource service fees.")
To estimate this I took fee level from when a previous 10q where UR+MBR were approximately the same as the adjusted ones above i.e. 945,000)
CEo did say the UR overflow work was lower margin than normal because of greater volume, so I am being conservative here)
Revenue 1807025 - Total Expenses 1151000
=656,025 pretax
40% tax
=393615 / 802424 shares
=Quarterly EPS 49c 8 4 =$1.96 EPS
PE 20 = $39.20
Overly Conservative Assumptions
1. UR overflow business completely disappears and announced new UR customer adds next to no revenue
2. Lien business adds next to nothing
3. HCO, MPN and NCM do not grow at all
CEO told me lien business is potentially large, but is not counting his chickens
I feel comfortable holding.
