Privia Health (PRVA)

Healthcare tech company Privia Health Group (NASDAQ:PRVA) reported Q1 CY2025 results topping the market’s revenue expectations, with sales up 15.6% year on year to $480.1 million. On the other hand, the company’s full-year revenue guidance of $1.85 billion at the midpoint came in 1% below analysts’ estimates. Its non-GAAP profit of $0.22 per share was 21% above analysts’ consensus estimates.

Company Overview

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.

The healthcare technology industry focuses on delivering software, data analytics, and workflow solutions to hospitals, clinics, and other care facilities. These companies enable providers to streamline operations, optimize patient outcomes, and transition to value-based care models. They boast subscription-based revenues or long-term contracts, providing financial stability and growth potential. However, they face challenges such as lengthy sales cycles, significant upfront investment in technology development, and reliance on providers’ adoption of new tools, which can be hindered by budget constraints or resistance to change. Over the next few years, the sector is poised for growth as providers increasingly prioritize digital transformation and efficiency in response to rising healthcare costs and patient demand for seamless care. Tailwinds include the growing adoption of AI-driven tools for patient engagement and operational improvements, government incentives for digitization, and the expansion of telehealth and remote patient monitoring. However, headwinds such as tightening hospital budgets, cybersecurity threats, and the fragmented nature of healthcare systems could slow adoption.

Privia Health's competitors include Agilon Health (NYSE: AGL), Oak Street Health (acquired by CVS Health), VillageMD (majority-owned by Walgreens Boots Alliance), and Aledade, along with traditional physician practice management companies and health system-affiliated physician networks.

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 $1.80 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.

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Privia Health grew its sales at an impressive 16.9% compounded annual growth rate. Its growth beat the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. Privia Health’s annualized revenue growth of 12.3% over the last two years is below its five-year trend, but we still think the results suggest healthy demand.

We can better understand the company’s revenue dynamics by analyzing its number of implemented providers, which reached 4,871 in the latest quarter. Over the last two years, Privia Health’s implemented providers averaged 14.1% year-on-year growth. Because this number is better than its sales growth, we can see the company’s underlying demand decreased.

This quarter, Privia Health reported year-on-year revenue growth of 15.6%, and its $480.1 million of revenue exceeded Wall Street’s estimates by 6.5%.

Looking ahead, sell-side analysts expect revenue to grow 6.1% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is above the sector average and indicates the market sees some success for its newer products and services.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Although Privia Health was profitable this quarter from an operational perspective, it’s generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.6% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.

Looking at the trend in its profitability, Privia Health’s operating margin decreased by 2.1 percentage points over the last five years, but it rose by 1.2 percentage points on a two-year basis. Still, shareholders will want to see Privia Health become more profitable in the future.

In Q1, Privia Health generated an operating profit margin of 1.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Privia Health’s EPS grew at an astounding 38.5% compounded annual growth rate over the last five years, higher than its 16.9% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t expand and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q1, Privia Health reported EPS at $0.22, up from $0.18 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Privia Health’s full-year EPS of $0.82 to grow 4.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Privia Health has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 4.6%, subpar for a healthcare business.

Taking a step back, an encouraging sign is that Privia Health’s margin expanded by 1.3 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

Privia Health burned through $24.06 million of cash in Q1, equivalent to a negative 5% margin. The company’s cash burn was similar to its $33.14 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? 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 2%, meaning management lost money while trying to expand the business. Investors are likely hoping for a change soon.

One of the best ways to mitigate bankruptcy risk is to hold more cash than debt.

Privia Health is a profitable, well-capitalized company with $469.3 million of cash and $5.44 million of debt on its balance sheet. This $463.9 million net cash position is 16.4% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Privia Health blew past analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. On the other hand, its full-year revenue guidance slightly missed. Overall, this print had some key positives. The stock remained flat at $23.35 immediately following the results.

Updated: June 23, 2025 at 11:59 PM EDT

Before investing in or passing on Privia Health, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Privia Health isn’t a terrible business, but it doesn’t pass our bar. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its relatively low ROIC suggests management has struggled to find compelling investment opportunities. And while the company’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders, the downside is its subscale operations give it fewer distribution channels than its larger rivals.

Privia Health’s P/E ratio based on the next 12 months is 25.3x. This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $30.35 on the company (compared to the current share price of $21.98).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.