Cantor Fitzgerald raises target on QHR to $3.25

After its second quarter results, Cantor Fitzgerald analyst Ralph Garcea is feeling bullish about QHR Corp. (Stock Quote, Chart, News: TSXV:QHR).

This morning, QHR reported its Q2, 2016 results. The company earned $610,000 on revenue of $8.0-million, a 21.2 per cent topline increase over the same period last year.

“As we continue to focus on both top-line growth and improved efficiencies, we are pleased to deliver an adjusted earnings before interest, taxes, depreciation and amortization margin of over 16 per cent for the quarter,” said CFO Jerry Diener. “In addition, this is the sixth consecutive quarter in which we have seen year-over-year growth in recurring revenue of 20 per cent or more, hitting 25-per-cent growth this quarter, while days sales outstanding also improved significantly year over year from 47 to 11 days.”

Garcea notes that QHR’s second quarter results met his and the street consensus expectations. The analyst says recent acquisition are bearing fruit for the Kelowna-based company.

“QHR is beginning to reap the benefits of the Medeo and Jonoke acquisitions,” he says. “QHR is currently 30% through the Jonoke customer base conversion; and currently has ~7,700 providers on AccuroEMR (up from 7,000 at the end of Q3/15). In general, one-third of new sales are coming from clients with paper charts and new startup clinic’s, one-third from clients moving off of competitor EMR systems, and one-third from growth in existing clients and legacy clients (six EMR acquisitions since 2004). In competitive bid situations, QHR’s win rate is ~70% (on a TTM-basis) vs 65% the last three quarters.”

In a research update to clients today, Garcea maintained his “Buy rating on QHR, but raised his one-year price target on the stock from $2.15 to $3.25, implying a return of 37 per cent at the time of publication.

Garcea thinks QHR will deliver Adjusted EBITDA of $5.1-million on revenue of $32.8-million in fiscal 2016, numbers he expects will rise to EBITDA of $7.7-million on revenue of $41.9-million. By fiscal 2018, the analyst thinks QHR will post EBITDA of $9.9-million on revenue of $51.8-million.

Disclosure: Cantech Letter Editor Nick Waddell owns shares of QHR.

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