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Medical Facilities Corp is a buy, says Echelon Wealth Partners

Medical Facilities CorporationEchelon Wealth Partners analyst Douglas Loe says Medical Facilities Corp’s (TSX:DR) strong fourth quarter results reveal high demand for U.S. surgical services.

Yesterday Medical Facilities Corp reported its fourth quarter and fiscal 2016 results. In the fourth quarter, the company generated EBITDA of (U.S) $32.2-million on revenue of $108-million, a topline that was 20.3 per cent higher than the same period last year.

“We are pleased with the initial progress we have made with respect to acquisitions in 2016. Looking ahead, continued revenue growth while controlling costs remains a key priority for our hospital leadership and executive team,” said CEO said Britt T. Reynolds. “As our network expands, so will our buying power as well as opportunities to share best practices among centres. I would like to congratulate our local leadership for continuing to deliver high-quality care and optimum patient outcomes. In 2017, they are now supported by a well-defined strategy for growth that is actively assessing both existing and new markets to identify and act on accretive opportunities.”

Loe notes that Medical Facilties Corp’s fourth quarter bested the street’s expectations by a wide margin.

“We certainly expected (the fourth quarter) to be a seasonally strong period, just not that seasonally strong,” he says. “Extremely strong FQ416 revenue on extremely strong procedure volumes, but still with modest y/y EBITDA decline even after new contribution from Unity: FQ4 revenue strength is usually driven by higher case volumes, with patients with private insurance choosing to undergo discretionary procedures after deductibles are extended at end-of-year. This dynamic has been consistently observed throughout Medical Facilities’ history, just not quite to this degree.

In a research update to clients today, Loe maintained his “Buy” rating and one-year price target of $22.50 on Medical Facilities Corp., implying a return of 16.6 per cent at the time of publication.

Loe thinks the company will generate EBITDA of (US) $112.6-million on revenue of $367.6-million in fiscal 2017. He thinks these numbers will improve to EBITDA of $114.8-million on a topline of $372.8-million the following year.

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About The Author /

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.
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