Buy Medicure on weakness, says M Partners

Ahead of the company’s Q1, 2017 results, M Partners analyst Steven Salz thinks Medicure (Medicure Stock Quote, Chart, News: TSX:MPH) is undervalued.

On Wednesday, Medicure will report its first quarter results. Salz thinks the company will post fully diluted earnings of $0.09 and EBITDA of $4.0-million on revenue of $12.3-million. The street consensus has the company earning $0.04 and posting EBITDA of $5.4-million on a topline of $12.2-million.

Salz says he thinks the recent weakness in the stock is related to its Apicore dealings.

“We believe recent share price weakness reflects market doubt whether MPH will exercise the remainder of its Apicore option,” he says. “The share price is currently trading at levels not seen since before the announcement of the initial acquisition for 64% majority interest in Apicore last November. Based on our estimates, the remaining 40% interest in Apicore on a fully diluted basis represents ~$0.60/share, substantially below the current valuation implication from the recent selloff. We remind investors that Medicure has until July 3rd, 2017 to exercise the company’s in the money option for the remaining issued shares of Apicore.”

In a research update to clients today, Salz maintained his “Buy” rating and one-year price target of $10.00 on Medicure, implying a return of 37 per cent at the time of publication.

Salz thinks Medicure will post EBITDA of $20.1-million on revenue of $65.7-million in fiscal 2017.