Concentra's Post-IPO Trading Levels Based On 'Its Dominant Market Position,' Says Analyst

Concentra Group Holdings Inc (NYSE:CON) priced in July its initial public offering of 22.5 million shares at $23.50 per share.

RBC Capital Markets initiated coverage of Concentra, citing a “differentiated operating and reimbursement model with strong growth.”

RBC Capital analyst Ben Hendrix wrote Concentra offers a unique investment strategy with minimal exposure to regulatory and payor negotiation challenges faced by other providers, as its revenue mainly comes from employers and workers compensation rather than government or managed care reimbursements.

“We see upside to Concentra’s post-IPO trading levels based on the company’s dominant market position as the country’s leading occupational healthcare provider,” RBC Capital noted.

The analyst initiated with an Outperform rating and a price target of $33.

Also Read: Concentra’s High-Quality Business Model Attracts Analyst Attention, Initiates With Buy Rating.

Since the IPO, Concentra’s trading performance has closely mirrored that of its parent company, Select Medical Holdings Corp.’s subsidiary (NYSE:SEM).

RBC Capital wrote that this valuation is too low for an independent entity with stronger profit margins and a more favorable reimbursement profile than Medicare-reimbursed post-acute care providers.

Although Concentra lacks direct public peers, RBC Capital analyst sees high-margin outpatient operators focused on musculoskeletal cases, such as Surgery Partners Inc (NASDAQ:SGRY) and U.S. Physical Therapy Inc (NYSE:USPH), as suitable comparisons.

Given Concentra’s more favorable reimbursement structure, the analyst expects its valuation to approach the 14.0x target as management executes its expansion plans and taps into a robust pipeline of growth opportunities.

Concentra provides occupational and consumer health services and other direct-to-employer care to more than 50,000 patients each day on average from 547 occupational health centers in 41 states and 154 onsite health clinics.

The company has 11,000 employees.

CON Price Action: Concentra Group Holdings stock is down 0.73% at $23.18 at publication Tuesday.

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