What happened
Shares of R1 RCM (RCM 9.85%) rose 10% on Tuesday. The stock closed at $7.51 on Monday, then opened on Tuesday at $7.52. It rose to a daily high of $8.31 shortly after 2 p.m. ET before closing at $8.25. The stock has a 52-week low of $6.71 and a 52-week high of $27.86 and is down more than 67% so far this year.
So what
The company, which provides technology-driven revenue cycle management services to healthcare providers, was coming off its 52-week low just a few weeks ago after it issued its third-quarter earnings report. Since then, the company’s stock price has slowly but steadily increased. It’s a sign that the initial drop was an overreaction to the earnings report, which had some positives.
R1 RCM reported third-quarter revenue of $496 million, up 30.6% year over year, but it had a net loss of $29.5 million, compared to net income of $17 million in the same period last year. Much of the loss was due to a nonpayment of a bill by one of R1 RCM’s customers that was having financial difficulties, the company said on its third-quarter earnings call. R1 RCM also said that longer payer turnaround was slowing earnings. The other bit of news that concerned investors was that it downgraded full-year guidance. It said it expected annual revenue now to be between $1.79 billion and $1.8 billion, down from an earlier range of between $1.85 billion and $1.87 billion. It also lowered net income to show a likely loss of between $8 million and $13 million, compared to a net gain of $55 million to $65 million.
Now what
The swing to a net loss for the year is still a worrying thought for investors. The healthcare company does still have a good long-term outlook as its annual revenue has steadily increased and its Cloudmed revenue intelligence platform has continued to grow. R1 RCM completed its $1.1 billion purchase of Cloudmed in June. Demand for the company’s services in a tight labor market is growing as healthcare providers struggle to keep up with billing services.
Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
