Even during a down period for the markets, Privia Health has gone against the grain, climbing to $22.91. Its shares have yielded a 29.3% return over the last six months, beating the S&P 500 by 30.9%. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Privia Health, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Despite the momentum, we're swiping left on Privia Health for now. Here are two reasons why there are better opportunities than PRVA and a stock we'd rather own.
Why Is Privia Health Not Exciting?
Operating in 13 states and the District of Columbia with over 4,300 providers serving more than 4.8 million patients, Privia Health (NASDAQ:PRVA) is a technology-driven company that helps physicians optimize their practices, improve patient experiences, and transition to value-based care models.
1. Fewer Distribution Channels Limit its Ceiling
Larger companies benefit from economies of scale, where fixed costs like infrastructure, technology, and administration are spread over a higher volume of goods or services, reducing the cost per unit. Scale can also lead to bargaining power with suppliers, greater brand recognition, and more investment firepower. A virtuous cycle can ensue if a scaled company plays its cards right.
With just $1.74 billion in revenue over the past 12 months, Privia Health is a small company in an industry where scale matters. This makes it difficult to build trust with customers because healthcare is heavily regulated, complex, and resource-intensive.
2. Previous Growth Initiatives Have Lost Money
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).
Privia Health’s five-year average ROIC was negative 5.5%, meaning management lost money while trying to expand the business. Its returns were among the worst in the healthcare sector.
Final Judgment
Privia Health isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 25.5× forward price-to-earnings (or $22.91 per share). This multiple tells us a lot of good news is priced in - we think there are better investment opportunities out there. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Would Buy Instead of Privia Health
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.