Mettrum Health is undervalued, says PI

PI analyst Jason Zandberg likes the improving margins at Mettrum Health (Mettrum Health Stock Quote, Chart, News: TSXV:MT).

On Monday, Mettrum Health reported its Q1, 2017 results. The company lost $1.01-million on revenue of $4.17-million, a 54 per cent topline bump over the same period last year.

“We are off to a very strong start in the year, with all of our key operational and financial metrics continuing to move in the right direction,” said CEO Michael Haines. “The combination of the momentum in our business driven by a rapidly growing client base, superior products and financial strength has Mettrum extremely well positioned for a great year ahead as we maintain our focus on growth, profitability and, ultimately, delivering shareholder value.”

Zandberg says Mettrum’s first quarter results were in-line with his expectations except with regard to margins, where the company’s 61 per cent figure bested the 55 per cent he had modeled. He says this has caused him to revise his estimates upward for bottom-line metrics.

“We have slightly increased our avg. selling price from $8.23 to $8.88 to reflect the increasing sale of oil extracts but offset this gain with a reduction of grams sold per patient,” says the analyst. “We have also increased our FY17 gross margin assumptions from 58% to 61% due to improving cost efficiencies related to the increased capacity at Bowmanville South facility. Our revised forecasts include revenue of $21.3M in FY17 (previously $23.3M) and $39.7M in FY18 (previously $39.6M) along with EBITDA of ($1.3M) in FY17 (previously $0.2M) and $7.5M in FY18 (previously $7.9M).”

In a research update to clients today, Zandberg maintained his “Buy” rating and one-year price target of $3.50 on Mettrum Health.

Zandberg thinks Mettrum will lose $3.93-million on revenue of $21.27-million in fiscal 2017. He expects these numbers will improve to a profit of $4.28-million on revenue of $39.66-million the following year.