Profound Medical is profoundly undervalued, says Echelon Wealth

A quarter that simply met his expectations isn’t shaking Echelon Wealth Partners analyst Doug Loe’s conviction that Profound Medical (Profound Medical Stock Quote, Chart, News: TSXV:PRN) is extremely undervalued.

Yesterday, Profound Medical reported its Q1 2017 results. The company lost $4.11-million on revenue of $591,517.

“The first quarter of 2017 represents a transformative period in Profound’s history, and builds on the momentum we established in 2016,” said CEO Dr. Arun Menawat. “Not only did the company record revenue for the first time, but we also announced the first Tulsa-Pro-paid procedure in Germany and our entry into the Finnish market. Taken together, these milestones demonstrate the growing interest in the Tulsa-Pro procedure as an attractive option for patients with localized prostate cancer. We look forward to updating our stakeholders as we progress.”

Loe notes that Profound’s first revenue ever came from new capital equipment sales in Europe for its flagship MRguided high-intensity frequency ultrasound prostate ablation platform TULSA-PRO, which is already CE Marked. He says it is still early days for TULSA-PRO’s commercial ramp in the EU, but says he sees positive signs in a growing install base, especially considering the potential impact of partnerships with Siemens and Philips.

“We believe Profound can generate value both through EU commercial traction (and through the growing positive case history that clinical use of commercial devices should generate) and through advancing TACT to data next year,” says Loe.

In a research update to clients today, Loe maintained his “Buy” rating and one-year target price of $4.00 on Profound Medical, implying a return of 344 per cent at the time of publication.

Loe thinks Profound Medical will post EBITDA of negative $15.5-million on revenue of $3.28-million in fiscal 2017. He expects these numbers will improve to EBITDA of negative $12.1-million on a topline of $9.8-million the following year.