Today we have a very speculative idea: take shares of a company, working in the field of fertilization, - Progins (NASDAQ: PGNY), - to capitalize on the growth in demand for her services.
Growth potential and duration: 18% in 14 months; 11% per year for 15 years.
Why stocks can go up: the demand for the company's services will only grow.
How do we act: take now 57,64 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what are we writing, Are forecasts and hypotheses, not a call to action. It is up to you to rely on our thoughts or not..
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And what about the author's predictions
Research, for example this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would perform better than people, but alas, they work worse.
Therefore, we do not try to build complex models.. The profit forecast in the article is the author's expectations. We indicate this forecast as a guideline: as with the investment in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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Investment editorial office
What the company makes money on
The name of the company is a modified progeny, which in the English dialect means "offspring".
The company is a provider of solutions in the field of reproductive medicine: from insurance to consulting on these issues and the sale of drugs. Probably, one might say, what is this insurance business. This is what the company does:
- prepares individual insurance plans in the field of reproductive medicine;
- gives access to consultants, including online, who provide medical advice and psychological support;
- gives access to a network of clinics and specialists in the relevant field;
- gives access to the system of appropriate drugs, outstanding recipes;
- provides access to analytics and data in the field of reproductive medicine.
It is important to understand, that the company itself does not produce anything. For the most part, Progyny services are used by corporate customers, providing appropriate insurance options to their employees. Progyny earns, when women, participating in the insurance program, use her services - freeze an egg and so on.
The company's annual report is practically useless: there is no segment breakdown.
The company operates only in the USA.
Arguments in favor of the company
It's alive! Live! The company is profitable, let it also have a large P / E — 73,5, she makes money, and this is not a loss-making startup. This already makes it attractive to many investors., since its market is considered very promising. In other words, better high P / E, than the absence of P / E.
Conjuncture. I see no prerequisites for explosive growth here., as in the case of cloud computing or cybersecurity. But in general, the situation for the company is positive: the average age of women in childbirth is growing in the USA, which automatically guarantees difficulties with conception. The reasons for this are economic: life in the USA, and in Western countries in general, it gets harder and harder for most, you have to work more and more - because the birth of a child is often postponed in time. The pandemic hasn't made having babies more attractive - and, may be, it will even have wider implications in the future: Wonder, how the virus itself and vaccines will affect pregnancy.
In the future, I would expect an increase in demand for Progyny services, albeit not so rapid, as in IT industries. And also that, that investors will run into the company's shares, considering, that this is an "extremely promising industry". In absolute terms, the company is not very expensive - $ 5.15 billion, - so the effect of such an influx will be serious.
Labor market. In the United States, there is now a shortage of workers on all fronts and many companies are raising benefits and wages.. It would be logical to lure workers with "reproductive insurance". So Progyny may well have a seasonal influx of customers much higher than usual..
Accounting. All debts of the company are more than covered by the money at its disposal. On the eve of the rate hike and the rise in borrowing costs, this will increase the company's attractiveness in the eyes of many investors..
Can buy. A promising halo and low cost of the company can attract a buyer from among large insurance companies.: they have a lot of money, but with points of business growth, everything is not so good. Progyny in this context would be a good acquisition for them..
What can get in the way
Your math is unstuck. According to the calculations of the company itself, its target market in the USA is $ 7 billion. Progyny takes 6,42% their market, but it stands as 73,57%. Expensive!
Actual P / E company - in the area 100 or more, since a third of its "profit" in the last quarter is tax deductions, and in 2020 tax deductions were given 80% arrived. Generally, these stocks are asking for a correction.
No rest. According to the company report, 65% her clients came to her after, how they refused the services of her competitors. Basically, this is a good indicator, but it also tells us about the competition in this area. A better competitor Progyny may appear, for, as Qui-Gon Jinn said, "There is always a bigger fish".
One deflection and you are lost. A business in such a delicate and intimate area is very vulnerable to reputational risks. In the United States, stories about perverted doctors in various fields constantly pop up.: from rhythmic gymnastics to the treatment of ex-military. At all, if you read the New York Times every day, then you can decide, that every third doctor in the USA is a sex maniac. Obviously, that this is a really big problem in the USA.
If suddenly Progyny is involved in such a story, then her business may stagger: corporate clients may well boycott the company. But long before that, the company's quotes will fly to hell.: she's obviously overrated.
"Good n-n-planchik". The US medical system is monstrously overcomplicated, it has a lot of pitfalls. Any changes to medical legislation and amendments to acts may negatively affect the company's business..
Pandemic of our anxiety. New large-scale quarantine may well force many women to postpone trying to conceive, so here the company is a hostage of fortune.
Unclear, what is this all for. Progyny depends on the inclusion of reproductive medicine in the insurance plans of different employers. But in the long term, the corporate sector in the United States may well begin to cut costs and cut spending on it..
What is the bottom line
The company's shares can be taken now by 57,64 $. And then there are two options for action.:
- wait until they grow 68 $ - slightly higher than their June highs in 64,5 $. I think, we will reach this level in the next 14 months;
- hold shares for the next 15 years, to witness that, how the company will evolve into Allianz from the world of reproductive medicine.
Due to the overestimation, the company should be mentally prepared for volatility. In which case, console yourself with the words of Democritus: “Raising children is a risky business. For in case of success, the latter was acquired at the cost of great work and care., in case of failure, grief is incomparable with any other ".