Centric Health’s risk return profile is “exceptional”, Beacon Securities says

The appointment of a new CEO at Centric Health (Centric Health Stock Quote, Chart, News: TSX:CHH) is being met with praise at Beacon Securities.

On Tuesday, Centric Health announced it had appointed industry veteran David Murphy as its president and CEO, effective May 1, 2018.

“We are very excited and privileged to have David join the Centric team,” said chairman and interim CEO Dr. Jack Shevel. “He has a solid pedigree and deep understanding of the Canadian healthcare landscape, having led major Canadian divisions of two of the world’s largest and most successful health care organizations. In particular, David has an impressive track record of increasing operating margins in the face of market pressures, leading complex integrations of newly acquired businesses and improving employee engagement and workplace culture.”

Beacon Securities analyst Doug Cooper says he expects this announcement will mark a turnaround for Centric Health’s stock, which has been flagging since last summer.

“We would expect the stock to rally on the back of this positive announcement,” the analyst says. “In fact, the CEO announcement should be the first of a string of positive milestones we expect from the company. Coupled with the fact that the stock trades at ~8.5x our FY18 EBITDA forecast (just base business) with tremendous upside from its 2 primary initiatives, we believe the risk-return is exceptional.”

In a research update to clients today, Cooper maintained his “Buy” rating and one-year price target of $1.25 on Centric Health, implying a return of 178 per cent at the time of publication.

Cooper thinks Centric will generate Adjusted EBITDA of $20.1-million on revenue of $184.2-million in fiscal 2018.