Viemed Healthcare has 83 per cent upside, Beacon Securities says

Medical equipment supply company Viemed Healthcare (TSX:VMD) posted revenue and EBITDA beats in its second quarter financials, an indication of the company’s long-term growth cycle, which is still in the early innings, says analyst Doug Cooper of Beacon Securities, who on Tuesday reiterated his “Buy” recommendation with a target price raise from C$7.80 to C$9.50.

On Monday, Viemed released its financials for the three and six months ended June 30, 2018, reporting adjusted EBITDA for the quarter of $4.1 million on revenue of $15.5 million, a 42 per cent year-over-year increase, and gross margin of 73 per cent. (All figures in US dollars unless otherwise indicated.) Management says it expects revenue for Q3/18 to increase to $16.3-$16.7 million and says that profits from Q2 were primarily reinvested in capital expenditures.

Cooper likes Viemed’s positive cash flow generation and points to a number of indications of the company’s long-term growth prospects, including approx. 1.25 million COPD patients in the United States that are potential candidates for Viemed’s ventilation therapy, a KPMG clinical study on VMD’s therapy that the company will be marketing to physicians over coming quarters and soon-to-come expansion into five new states (Alabama, Colorado, Michigan, Florida and California).

“Based on its Q2 results, the stock trades at 8.5x LQA EBITDA versus peers such as Savaria (TSX:SIS) at 19x,” says the analyst in an update to clients. “Based on forward estimates, the stock trades at 6x versus 12-13x for the peer group. Given its better organic growth and higher margin profile, VMD should trade to at least an equal multiple.”

The analyst expects Viemed to generate EBITDA in 2018 of $17.1 million on revenue of $63.4 million and EBITDA in 2019 of $21.8 million on a topline of $80.3 million. His revised target represents a projected return of 83 per cent at the time of publication.