Viemed Health has a big upside, Beacon Securities says

Strong quarterly results show that patient growth over the long term should be expected for Viemed Health (Viemed Health Stock Quote, Chart, News: TSXV:VMD), says analyst Doug Cooper of Beacon Securities, who on Tuesday reiterated his “Buy” recommendation while raising his target price to $7.80.

On Monday, home medical equipment supplier Viemed announced its first quarter ended March 31, 2018, financials, reporting revenues of $14.1 million and Adj. EBITDA for the quarter of $3.8 million. Revenue came in-line with guidance while EBITDA was better than expected, says Cooper, who says that the company has so far only reached about five per cent penetration in its US market.

“In terms of growth, we believe Q1 is reflective of the long-term growth cycle for VMD’s business, which is in the early innings,” the analyst says in an update to clients. “Viemed gave Q2/FY18 guidance of $14.8-$15.3 million in revenue with similar EBITDA margins as Q1/FY18. This would represent continuation of 7 per cent sequential growth (30 per cent annualized).”

Cooper says the company is now tracking ahead of his previous schedule and, as a result, he has revised his revenue and EBITDA forecasts.

“For FY18 and FY19, our revenue/EBITDA forecast moves to $61.5 million/$16.7 million (was $60 million/$16.1 million) and $77.5 million/$21 million (was $76 million/$20.5 million). Based on a FY18 period-ended patient count of 5,600, revenue/EBITDA run-rate of $69/$19 million, the stock is trading at 6.6x – an almost 50 per cent discount to its peer group,” he says.

The analyst’s target price of $7.80 (was $7.00) is based on a 12x his exit-rate FY18 EBITDA valuation and represents a projected return on investment of 81 per cent at the time of publication.

“We believe VMD is one of the best organic growth companies in the healthcare service sector but remains distinctly under-owned,” he says.