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The Junk Pile

Is Change Healthcare Making Money?

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Change Healthcare (NASDAQ: CHNG) is one of of many healthcare-technology companies benefiting from coronavirus.

Mr. Market paid $15.73 for Change Healthcare on 13 January 2020 and $24 for Change (CHNG) on 15 January 2021. Investors are interested in Change because it provides software, analytics, technology-enhanced services, and network solutions for healthcare providers.

Change Healthcare solutions include Enterprise Medical Imaging, Customer Relationship Management, Payment Accuracy, End-to-End Revenue Cycle Management, Clinical Review, Medical Networking, Provider Network Optimization, Provider Payment Management, Enrollment, Care Operations, Payment Solutions, Pharmacy Benefits, Risk Adjustment Analytics, Healthcare Consulting, and Clinical Decision Support.

Why is there more interest in Healthcare Stocks?

I think investment in healthcare is growing because people are giving healthcare more thought because of coronavirus. The pandemic and all the coverage of COVID care have many people researching and investigating healthcare stocks.

In particular, the vaccine research has led to a new focus on biotechnology. Similarly, the remote-work explosion has increased interest in business automation and digitization companies such as Change Healthcare (CHNG).

The belief is that there will be more demand for services such as Change’s because COVID-19 has closed offices forcing companies to automate many business functions in the cloud. For example, healthcare providers could move all their accounts payable or billing into the cloud and have their clerical staff work from home.

Is Change Healthcare Making Money?

Change Healthcare (CHNG) makes some money. For instance, Change reported a quarterly operating income of -$3.34 million on 30 September 2020.

Similarly, Change Healthcare reported a quarterly gross profit of $429.28 million on 30 September 2020. Notably, Change Healthcare reported a quarterly operating loss of -$7.68 million on 30 June 2020.

Stockrow does not provide revenue growth figures and income data for Change Healthcare before 30 June 2020. However, Change Healthcare’s quarterly revenues grew from $694.18 million on 30 June 2020 to $755.94 million on 30 September 2020.

How Much Cash Does Change Healthcare have?

Change Healthcare generated some cash in the form of a $127.46 million quarterly operating cash flow on 30 September 2020. The quarterly operating cash flow fell from $169.10 million on 30 June 2020.

Change Healthcare’s quarterly operating cash flow rose from -$153.93 million on 31 March 2020.

Change reported a negative quarterly ending cash flow of -$10.87 million on 30 September 2020. The quarterly ending cash flow fell from $178.35 million on 30 June 2020 and $407 million on 31 March 2020.

Change Healthcare borrowed some money in 2020 in the form of $33.73 million and $243.24 million quarterly financing cash flows on 31 March and 30 June 2020. The financing quarterly financing cash flow fell to -$65.46 million on 30 September 2020.

In 2020, Change Healthcare’s long-term debt rose from $23.66 million on 31 December 2019 to $4.984 billion on 30 September 2020. Thus, Change Healthcare is acquiring enormous amounts of debt while making little money.

What Value Does Change Healthcare Have?

Change Healthcare (CHNG) offered some value in the form of $10.201 million in in assets on 30 September 2020.

However, the total assets rose from $2.22 billion on 31 December 2020. Thus, Change Healthcare experienced enormous growth in 2020. However, I think Change Healthcare has little ability to accumulate cash.

It reported $167.48 million in cash and short-term investments on 30 September 2020. The cash and short-term investments fell from $410.40 million on 31 March 2020.

Finally, I think Change Healthcare is too new a company to be an excellent investment. I consider Change Healthcare a poor investment because there is no evidence this company can make money.

I advise investors to stay away from Change Healthcare Inc. (NASDAQ: CHNG) until they show this company can make money from software.