CRH Medical is still undervalued, says Clarus

Following CRH Medical’s (CRH Medical Stock Quote, Chart, News: TSX:CRH) first quarter results, Clarus Securities analyst Noel Atkinson is feeling bullish about the Vancouver-based company.

Yesterday, CRH reported its Q1, 2015 results. The company generated EBITDA of (U.S.) $6.8-million on revenue of $13.93-million, a topline that was up 143 per cent over the $5.74-million in revenue the company generated in the same period last year.

“Two thousand fifteen was an excellent year with respect to our business performance, with December marking the first year of our entrance into the anesthesia space,” said CEO Edward Wright. “We were able to further enhance our anesthesia services business with four additional accretive transactions over the course of the year, and we believe that momentum will carry through into 2016. The CRH O’Regan system continues to perform extremely well in terms of revenue growth, earnings before interest, taxes, depreciation and amortization, and the number of physicians trained. In addition, it is our belief that the relationships we have fostered with this growing group of trained gastroenterologists will continue to be a source of growth for our anesthesia business. CRH is proud to be a trusted partner of the GI community, delivering value-added services to both physicians and their patients.”

Atkinson says CRH anesthesia division results demonstrate management’s ability to complete and integrate practices rapidly. He believes there are numerous reasons to own the stock.

“We see CRH as a great way to gain exposure to the U.S. healthcare market, given its high Operating EBITDA margin (47% in 2016e), strong free cash flow, solid pipeline to consolidate a highly fragmented niche, consistent organic growth, and low leverage.”

In a research update to clients today, Atkinson maintained his “Buy” rating and one-year target price of $6.50 on CRH Medical, implying a return of 55.9 per cent at the time of publication.