Protech Home Medical is undervalued, Bruce Campbell says

It’s been a bumpy road in recent years for Protech Home Medical (Protech Home Medical Stock Quote, Chart TSXV:PTQ) but investors willing to take a look under the hood will now find a finely-tuned machine, says portfolio manager Bruce Campbell, who argues that Protech is undervalued.

US healthcare play Protech Home Medical was formed from the spin-off of Viemed Healthcare from Patient Home Monitoring, with the name change and subsequent ticker change to PTQ coming last year. The stock has been on the rise so far in 2019, climbing 75 per cent over January and early February but more or less trading sideways since.

Campbell says that the company has demonstrated its new growth-oriented strategy over recent quarters.

“They’ve really done a transformation. A couple of things that they’ve been working hard on over the last year are their accounts receivable and getting their profit margin up. Both of those numbers have looked fantastic over the last three or four quarters,” says Campbell of StoneCastle Investment Management to BNN Bloomberg on Wednesday.

“They’re highly profitable and they have less accelerated growth than what we’ve seen with Viemed but it’s still phenomenal growth,” he says. “They’re around the 20 per cent mark.”

Protech last reported its earnings in late February when it produced better-than-expected top and bottom line results, coming in with $21.7 million in revenue, a 17-per-cent year-over-year growth rate and Adj. EBITDA of $4.4 million, a 186-per-cent year-over-year increase. (All figures in US dollars.)

Campbell believes the stock will start jumping once investors get more comfortable with the name.

“The stock is trading at less than 10x next year’s EBITDA, so, when you look at a company that’s growing at 20 per cent and they’re only trading at 10x, it should be significantly higher than where it is,” says Campbell.

“Management continues to execute. They’ve done a few small acquisitions and they’ve told the market that this is something that they’re going to continue to do, where they see an opportunity to grow not just organically but by acquisition. It’s one that we own and we think that as people become more aware of what they’re doing and the growth and how they’ve turned things around, the stock goes higher,” he says.