We came across a bullish thesis on Progyny, Inc. (NASDAQ:PGNY) on Directionally Correct Research’s Substack by Will Powers. In this article, we will summarize the bulls’ thesis on PGNY. Progyny, Inc. (NASDAQ:PGNY)'s share was trading at $14.71 as of Dec 26th. PGNY’s trailing and forward P/E were 24.52 and 9.37 respectively according to Yahoo Finance.
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Progyny, Inc. (NASDAQ:PGNY) has faced recent challenges, including topline deceleration, disappointing guidance management, and the loss of Amazon as a major client, but these are largely temporary and addressable issues. Despite these setbacks, the company remains a best-in-class operator in the fertility benefits management space, underpinned by a scalable, asset-light model and secular tailwinds in the growing reproductive health market. PGNY’s current valuation, trading at just 5.5x 2025 consensus EBITDA with over 80% free cash flow conversion and a net cash position representing nearly 20% of its market cap, presents a compelling investment case. The business maintains strong growth potential, with a credible path to high teens growth beyond 2025 as the market expands and the company captures new opportunities.
PGNY’s Smart Cycle structure and accompanying services have proven highly effective, offering lower costs and better outcomes for employees, employers, and healthcare providers alike. Employees benefit from dramatically reduced out-of-pocket expenses and a streamlined, supportive fertility process. Employers gain a differentiated talent attraction tool and cost savings from improved clinical outcomes, while providers receive increased patient volumes and reduced administrative burdens. However, challenges in 2024, including product mix shifts, a Supreme Court decision affecting IVF accessibility in Alabama, and unexpected utilization trends, pressured growth and weighed on investor sentiment.
The company’s credibility was further strained by overly optimistic guidance, which assumed record metrics from 2023 would persist. These assumptions proved misplaced, leading to several downward revisions. However, management has since shifted to more conservative projections, prioritizing transparency and incorporating variability into forecasts. This reset, while painful, paves the way for rebuilding credibility with the Street. Additionally, the loss of Amazon, which accounted for 13% of sales, is significant but not structural, as PGNY retains a diversified client base and substantial white space for growth.
As PGNY laps the customer loss and utilization patterns normalize in 2025, growth is expected to reaccelerate to the mid/high teens by 2026, bolstered by operating leverage, new product launches, and margin expansion. With EBITDA projected to reach $300M and free cash flow per share at $2.75 by 2027, the stock offers substantial upside potential. Even at a modest multiple of 6x EBITDA, the stock could deliver a 20%+ IRR over three years, with the potential for further gains if re-rated to 8x. For investors seeking a high-quality operator with strong cash flow generation and an attractive valuation, Progyny represents a compelling opportunity.
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