According to the U.S. Census Bureau, the average age of women trying to have a baby has jumped from 27 to 30, the highest on record. There are various reasons for the jump: More women are focusing on their careers during their 20s, and there is the desire to be more financially stable before starting a family.
So when some women begin trying to give birth, it's at a later age, which presents challenges due to a decline in fertility. According to the Centers for Disease Control and Prevention, 12.2% of couples are impacted by infertility, with 1/3 of those cases due to male infertility, 1/3 for females, and the rest a combination. Progyny (PGNY 2.57%) offers an integrated fertility services network platform to provide that assistance.
Can its growth projections give investors a reason to consider it as a long-term investment?
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What is Progyny and what exactly does it do?
Progyny specializes in fertility-benefits management services, backed by a large nationwide network of fertility experts, including 900 specialists across 650 clinics in the U.S. The company combines that with a data-driven model offered as a service to employers to help their employees have a successful pregnancy. Such a large network makes it easier for employers to offer the benefit to employees.
The company basically takes the resources available to patients and providers and makes them more easily accessible and more effective. Its Smart Cycle program allows members to customize treatment, which controls costs, allowing more attempts to become pregnant without worrying about benefit coverage running out mid-treatment.
The pros and cons of fast growth
Even in a difficult economy, those looking to have a baby have shown no signs of delaying their timeline. Meanwhile, employers are showing signs of expanding coverage. So there doesn't seem to be concern with any short-term drop-off in the need for Progyny's services. This should equate to consistent, if not growing, revenue.
It also helped lead to a fast rise in the stock price after Progyny went public in 2019.
The stock climbed from $26 to $64 by May of 2021. But the pandemic, followed by a broader market decline, caused investors to get nervous about what impact those events might have on plans to build families. The stock has gradually lost its steam and now sits at $40, still a healthy gain over the IPO price, but it also comes with a hefty price-to-earnings ratio of 87.
Nonetheless, Progyny has the advantage of being the first integrated fertility platform services company to go public. And with its revenue and earnings increase, combined with a falling stock price, this is a growth stock to keep an eye on.
Projected market growth
Second-quarter revenue grew 52% year over year to $195 million, driven by an increase in the number of new clients. And the retention rate of customers is 98%. Both medical and pharmacy revenue growth contributed to excellent second-quarter results, including a 48% increase in gross profit from a year ago.
Progyny is now calling for $0.14 to $0.19 in earnings per share on $750 million to $775 million in revenue for the full year, a 52% boost year over year in revenue. This marks the second consecutive quarter in which the company has raised the lower end of full-year revenue guidance, this time by 2%.
Full-year revenue was $345 million in 2020, $501 million in 2021, and is now projected at upward of $750 million for 2022. The outlook is bright for Progyny as the market value for fertility services is expected to grow at a 4.7% compound annual rate through 2030, to a value of $48 billion. More people are turning to fertility services as families are started at a later age, and more employers are viewing the benefit as a necessity.
This should provide strong support for the company's short-term revised guidance for full-year 2022, and create a long runway for growth. While the company's top-end guidance has remained consistent, there is more confidence in hitting the projections, and that should make investors more confident in Progyny's role in a long-term portfolio.
