InnovAge PE Selloff at $9.25 Triggers GF Value Overvaluation Flag
Apax, Welsh Carson sell 10M INNV shares at $9.25, 57% above GuruFocus intrinsic estimate. Insider selling adds caution as offering closes Sept. 24.
InnovAge Holding Corp. currently carries an Alpha Score of n/a, giving AlphaScala's model a neutral read on the setup.
InnovAge Holding Corp on Sept. 23 announced an underwritten public offering of 10 million shares priced at $9.25 each. Investment funds tied to Apax Partners and Welsh, Carson, Anderson & Stowe are selling the shares, with an option for underwriters to purchase up to 1.5 million more over 30 days.
InnovAge will not receive proceeds from the sale, only covering administrative costs. The offering gives the private equity backers a partial exit from the PACE provider, which runs Programs of All-Inclusive Care for the Elderly across Colorado, California, New Mexico, Pennsylvania and Virginia. The deal is expected to close Sept. 24.
InnovAge trades at a price-to-sales ratio of about 1.52, above the company's historical median near 1.1x. Revenue has grown at a 12.8% annualized rate over three years. The company remains unprofitable. Trailing twelve-month earnings per share are negative $0.02, and net margins run at negative 26%. The losses make traditional price-to-earnings valuation not applicable.
GuruFocus's GF Value metric, which blends historical trading multiples, business growth and projected performance, estimates InnovAge's intrinsic value at $6.80 per share. At the $9.25 offering price, that implies an overvaluation of about 56.7%. The metric serves as a directional caution, especially for a company with negative earnings.
InnovAge's GF Score, a composite of financial strength, profitability, growth, momentum and valuation, stands at 57 out of 100. The strongest component is financial strength at 7 out of 10, reflecting solid liquidity and manageable debt. Profitability scores 4 of 10. Growth and momentum each score 3 of 10. Valuation also scores 3 of 10.
Two premium gurus tracked by GuruFocus hold positions in InnovAge. They have trimmed those holdings in recent quarters. No insider purchases have occurred in the past 12 months. Insider selling totaled $0.2 million over the same period. The combination of private-equity selling, guru trims and zero insider buying signals caution among those closest to the company.
The secondary offering puts more shares into the float at a price above the GF Value estimate. A narrowing of that gap would require either faster revenue growth that lifts the intrinsic value estimate, or a material improvement in profitability that compresses the price-to-sales multiple. Worsening factors include continued operating losses, further insider or guru selling, or a broader downturn in healthcare services valuations.
The offering is expected to close on Sept. 24.
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