Premier currently trades at $22 per share and has shown little upside over the past six months, posting a middling return of 4%.
Is there a buying opportunity in Premier, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Premier Will Underperform?
We're sitting this one out for now. Here are three reasons why we avoid PINC and a stock we'd rather own.
1. Revenue Spiraling Downwards
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, Premier’s demand was weak and its revenue declined by 2.9% per year. This was below our standards and is a sign of poor business quality. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Premier’s revenue to drop by 10.6%, close to its 2.9% annualized declines for the past five years. This projection is underwhelming and indicates its newer products and services will not lead to better top-line performance yet.
3. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Premier, its EPS declined by 9.5% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
Premier falls short of our quality standards. That said, the stock currently trades at 16.4× forward P/E (or $22 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
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