Integration Of Kyber Data Science Will Provide Differentiated Value To Customers

Key Takeaways

• The acquisition of Kyber Data Science and strategic partnerships are expected to enhance market reach and shareholder value, driving revenue growth.
  
• Integration of advanced data capabilities and diversified data relationships could improve operational efficiencies and net margins.
  
• Stagnant revenues, customer attrition, and uncertain acquisition synergies pose challenges to Forian's future earnings and financial stability.

Catalysts

Provides a suite of data management capabilities, and information and analytics solutions to optimize and measure operational, clinical, and financial performance for customers in the healthcare and related industries.

• The acquisition of Kyber Data Science is expected to expand Forian's addressable market, including financial services, and enhance data science capabilities. This could drive future revenue growth as they tap into new client bases and markets.
  
• The recent sales wins in healthcare services and life sciences are anticipated to positively impact revenue in upcoming quarters, breaking the stagnant revenue range seen in 2024.
  
• Forian's strategic partnerships and potential strategic transactions, including share or note repurchases, are likely to enhance shareholder value and may result in a favorable impact on earnings per share (EPS).
  
• The integration of Kyber's advanced data science and machine learning capabilities is expected to provide differentiated value to customers, potentially improving net margins through the delivery of higher-value, higher-margin products and services.
  
• The termination of certain information contracts and ongoing investments in diversified data relationships suggest increased operational efficiencies and potential cost reductions, which could positively impact net margins.

Forian Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Forian's revenue will grow by 10.8% annually over the next 3 years.
• Analysts are not forecasting that Forian will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Forian's profit margin will increase from -22.1% to the average US Healthcare Services industry of 14.7% in 3 years.
• If Forian's profit margin were to converge on the industry average, you could expect earnings to reach $3.9 million (and earnings per share of $0.13) by about April 2028, up from $-4.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 48.5x on those 2028 earnings, up from -13.5x today. This future PE is greater than the current PE for the US Healthcare Services industry at 47.7x.
• Analysts expect the number of shares outstanding to decline by 0.33% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.43%, as per the Simply Wall St company report.

Forian Future Earnings Per Share Growth

Risks

• The company's revenues have been flat and were actually lower in the third quarter year-over-year, indicating potential challenges in achieving sustained revenue growth. This could impact revenue stability in the future.
  
• Forian experienced customer attrition in the previous year, which has negatively impacted revenue, and any further attrition or difficulty in customer retention could continue to affect future earnings.
  
• Operating losses were the same year-over-year despite reduced revenue, suggesting limited flexibility in controlling costs, which could affect net margins if revenues don't improve.
  
• The company's net income decreased significantly compared to the previous year due to a past one-time gain on the sale of investments. This indicates potential volatility in earnings as future external gains might not compensate for operating losses.
  
• The integration and success of the recent acquisition of Kyber Data Science are uncertain, and any failure to realize expected synergies could impact anticipated financial performance and earnings.

Valuation

• The analysts have a consensus price target of $5.0 for Forian based on their expectations of its future earnings growth, profit margins and other risk factors.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $26.8 million, earnings will come to $3.9 million, and it would be trading on a PE ratio of 48.5x, assuming you use a discount rate of 8.4%.
• Given the current share price of $1.89, the analyst price target of $5.0 is 62.2% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.