QHR Corp’s Q2 was "just what the doctor ordered", says Laurentian

Another day, another price target raise for Kelowna-based electronic medical records company QHR Corp (QHR Corp Stock Quote, Chart, News: TSXV:QHR).

Yesterday, following the company’s second quarter results, Cantor Fitzgerald analyst Ralph Garcea hiked his target on the company from $2.15 to $3.25. Today, Laurentian Bank Securities analyst Nick Agostino followed suit, raising his price target on the stock from $2.25 to $3.00.

Yesterday, 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.

“This second quarter produced further improvements in our operation, strong sales and customer retention, and an expanded network of partners to help us all bring our provider and patient tools further in to the mainstream of our health care system,” said CEO Mike Checkley.

Agostino says this quarter was “just what the doctor ordered” for QHR. The analyst focused on the company’s expanding profitability, and explained why he has now raised his earnings multiple on the stock from 13x to 15x.

“Strong margin performance in 1H/16 puts the company on track to exceed its 15%+ target for the year, and gives us additional comfort in our 16.8% margin estimate for 2H/16,” he said. “The increase to our multiple reflects the company’s strong sub adds and opex control, as well as confirmation in the quarter that margin expansion remains on track. Our 15x multiple aligns with Canadian software peers at 15.2x (excl. outliers) with a NTM sales growth + LTM EBITDA margin profile of 32% vs. 37% for QHR. Industry comparables at 11.6x have a 20% profile equivalent.”

Agostino thinks QHR will generate EBITDA of $5.4-million on revenue of $33.2-million in fiscal 2016, numbers he expects will rise to EBITDA of $7.4-million on revenue of $40.7-million the following year, and to EBITDA of $9.8-million on a topline of $48.5-million in fiscal 2018.

Disclosure: Cantech Letter’s Nick Waddell owns shares of QHR Corp.

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