Phreesia, a provider of digital engagement solutions for the healthcare industry, is capitalizing on several secular tailwinds. By Dan Victor

   -- Phreesia is a leader in patient intake and digital engagement solutions 
      for the healthcare industry. 
 
   -- The company is capitalizing on several secular tailwinds, including 
      demand for digitization and a shift toward more personalized medicine. 
 
   -- Strong earnings momentum and a long runway of growth opportunities should 
      support upside in the stock. 

If your last visit to a healthcare provider was missing the cumbersome clipboard and paper forms, that welcome change may have been thanks to Phreesia.

For two decades, the Wilmington, Del.--based technology company has been a leader in patient intake automation and digital engagement solutions. With more than 4,400 healthcare clients -- from entire hospital networks to specialty practices -- Phreesia has nearly tripled its base since going public in 2019. Last year, it facilitated over 170 million patient visits, or around 1 in 7 of the U.S. total, solidifying its position as a leader.

Its impact may just be beginning. With rapidly improving financials, including four consecutive quarters of positive free cash flow and solid sales momentum, Phreesia looks like a buy.

Its platform extends far beyond patient registration, modernizing the entire care journey from initial scheduling and communications to managing medical payments within a privacy-protected ecosystem. The business model benefits from a powerful flywheel: Nearly half of the company's revenue comes from subscriptions, providing a predictable revenue stream.

During a conference call with investors this year, Phreesia CEO and co-founder Chaim Indig shared how the company is deploying new artificial-intelligence capabilities. "AI is enabling us to do things within the Phreesia platform and across our network that we are very excited for and is driving massive value for our clients," he said. "And we think over a very near term, a return for our investors."

Complementing these recurring services, about a quarter of Phreesia's revenue comes from its integrated payment solutions, which earn fees for processing patient copays and other out-of-pocket expenses.

Phreesia has also found success with its Network Solutions group, its most differentiated source of revenue. This segment transforms its vast patient network and rich anonymized data into a valuable resource for pharmaceutical, biotech, and medical-device companies.

All of the top 10 global drugmakers use Phreesia for targeted advertising solutions. Unlike broad-reach mass media like television commercials, which have come under increasing regulatory scrutiny, Phreesia's patient communications are personalized, focusing on educational content based on the health profiles of consenting patients. This approach means Phreesia would likely avoid stricter controls that might be imposed on other outreach channels.

The company's financial strategy is coming together this year. In the first quarter, revenue rose 15% year over year to $116 million. Phreesia's results also show a decisive shift to consistent profitability. Adjusted earnings before interest, taxes, depreciation, and amortization, or Ebitda, for the trailing 12 months was $54 million, reversing a loss of $18 million from the same period last year.

This turnaround was propelled by a decline in operating expenses as a percentage of revenue, reflecting increased operational efficiency as the company scales up, fueling a sharply higher Ebitda margin. For fiscal year 2026, which ends in January, Phreesia is targeting adjusted Ebitda between $85 million and $90 million at the midpoint, a 138% increase from last year.

Stephens analyst Jeff Garro argues that the "stage is set for more operating leverage." He believes the company's founder-led, product-oriented culture supports continued double-digit growth "well ahead of what gets announced to investors." The report further highlights Phreesia's ability to attract incremental advertising dollars from the pharmaceutical industry as an opportunity that's in the early stages. Garro has an Overweight rating on the stock with a target price of $32, implying 18% upside from Tuesday's close $27.10.

Longer term, Phreesia's profitable growth potential is significant. Management estimates a $10 billion addressable market, benefiting from tailwinds like rising healthcare spending and the digital transformation of medicine, helped by new clients and untapped monetization within its existing base.

Backed by a robust balance sheet, Phreesia's fundamentals are gaining quality, a positive sign for the stock heading into the second half.

Valuation looks reasonable, too. Phreesia shares trade at a 27.7 times forward price/earnings ratio based on a consensus fiscal 2026 adjusted earnings-per-share estimate of $0.98. Looking ahead to fiscal 2027, projected earnings momentum narrows the one-year forward earnings multiple to a more attractive 20.2.

Aaron Kimson at Citizens, another Wall Street analyst bullish on Phreesia, reaffirmed a Market Outperform rating on the stock in May, pointing to the company's better-than-expected first-quarter results and improving bottom line. He also cited a stock repurchase authorization of up to 2.5 million shares, announced earlier this year, as projecting confidence in the company's cash flow outlook.

Phreesia faces competition from both smaller vendors, such as privately held Luma Health, and larger electronic health-record providers, such as Epic Systems and Oracle unit Oracle Health, which offer alternative patient intake services. From this group, Phreesia stands out as the established pure play in the segment, with a history of innovation.

Nevertheless, this dynamic industry landscape is the main risk for Phreesia, especially if there are signs the company is losing market share with payment volumes and its client growth. Similarly, underwhelming financial results reflecting execution missteps would derail stock sentiment.

For now, Phreesia, with a clean bill of health and digital pulse, presents a compelling opportunity as a small-cap tech leader worthy of a spot in your portfolio.

The Technical View

Phreesia has been smartly digesting a 79% advance between last November and this February. The range is likely to be taken out to the upside given the prior powerful uptrend. If that top of that range at the 30 number is taken out to the upside, look for a move to $43 in the first half of 2026. -- Doug Busch

Write to Dan Victor at dan.victor@barrons.com

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August 08, 2025 21:30 ET (01:30 GMT)

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