Buy Protech Home Medical for 194 per cent upside, Beacon says

Following the company’s second quarter results, Beacon Securities analyst Doug Cooper has maintained his “Buy” rating on Protech Home Medical (Protech Home Medical Stock Quote, Chart TSXV:PTQ).

On May 21, PTQ reported its Q2, 2019 results. The company lost $530,000 on revenue of $21.9-million, a topline that was up 17 per cent over the same period last year.

“I am pleased with our second quarter financial results,” CEO Greg Crawford said. “We continue to achieve these superior financial results while also improving on all aspects of our business including an increase in the number of patients served and respiratory resupply set-ups or deliveries. We continue to focus on our solid organic growth and enhance the profitability of our core operations. We are obviously disappointed in the cyberattack we were subject to a few weeks ago. The investigation into the attack is ongoing. We are working closely with our advisers and applicable authorities. Due to the ongoing nature of this investigation, I am not at liberty to say more at this time. It goes without saying, we will update the market at the appropriate time. There was a short delay in the previously announced debenture redemption and that has now been settled. Remaining liquid assets, the profitable cash flow of the company and the proceeds of the approximately $3.6-million loan provide Protech with sufficient funds to grow our business and meet our internal targets. Liquidity is not an issue for Protech.”

Cooper says he believes the organic growth story remains strong for the company. He adds that the company has already recovered from the cyber attack it recently fell victim to, and says the company is actually in its best working capital position since the spin-out.

“We remain steadfastly bullish of companies participating in the aging demographic segment given that as the Baby Boom population reaches the “Age of Illness”, they will need more products/services of the kind that PTQ offers,” the analyst adds. “This is, and will continue to provide, a tailwind for growth. Despite its excellent execution over the past 4 quarters, the shares continue to trade at a material discount to its peer group. Based on our forecasts (which we believe are conservative given at the half-way point of the year, revenue/EBITDA is already at 50% of our FY19 forecast with the seasonally weakest quarter now behind it), the stock is trading at 5.3x FY19 estimates and 4.3x FY20 versus the peer group which trades in the 8-12 range.”

In a research update to clients May 22, Cooper maintained his “Buy” rating and one-year price target of $2.50 on PTQ, implying a return of 194 per cent at the time of publication.

Cooper thinks Protech will post EBITDA of $16.9-million on revenue of $88.7-million in fiscal 2019. He expects those numbers will grow to EBITDA of $20.8-million on a topline of $104.1-million the following year.