Viemed Health is too good to trade this cheap: Beacon

Following another record quarter, Beacon Securities analyst Doug Cooper has raised his price target on Viemed Health (Viemed Health Stock Quote, Chart TSX:VMD).

On Monday, Viemed reported its Q1, 2019 results. The company posted Adjusted EBITDA of $4.8-million on revenue of $20.4-million, a topline that was up 45 per cent over the same period last year.

“We have started the year fast, with our growth outpacing prior year’s first quarter growth rate as we continue to get our therapy on more patients and expand into more geographic areas,” CEO Casey Hoyt said. “We continue to invest in our company as we have expanded our technology and marketing efforts at a rapid pace. These investments, along with our continued efforts towards trading on a U.S. exchange, should provide benefits to all shareholders in the future.”

Cooper notes that his prediction that VMD’s growth would accelerate came to pass in this quarter. He says the stock is simply too good to trade at such cheap levels.

“With the success that Viemed has shown to date, we believe it not only should get credit from the investment community but also instill a belief that we are in the early innings of a great growth story,” the analyst says. “Consider: a) We know that there is a large opportunity with the entire NIV market at less than 10% of its potential. As physicians and care givers become aware of the clinical efficacy of the therapy, we believe referrals from them could snowball. The clinical study undertaken by KPMG has just been started to be marketed by Viemed. Dissemination of that report should dramatically accelerate awareness and recruitment of patients; b) VMD is rapidly expanding its geographic presence. It anticipates being in all lower 48 states in the next 18 months. Furthermore, we believe some very large states, such as California, New York and Florida (the latter still in the application process) have not materially contributed to revenue to date; c) Products other than NIV are starting to contribute to revenue. With its infrastructure in place (RTs, RNs), we believe they can provide more inhouse services to the same client. The product diversification strategy could not only reduce risk but grow its brand as a one-stop service company.”

In a research update to clients today, Cooper maintained his “Buy” rating on Viemed, but raised his one-year price target on the stock from $10.50 to $12.50, implying a return of 59 per cent at the time of publication.

Cooper thinks Viemed will post EBITDA of (All figures USD) $22.8-million on revenue of $83.9-million in fiscal 2019. He expects those numbers will improve to EBITDA of $29.7-million on a topline of $109.1-million the following year.

“With the stock trading at ~11x LQA EBITDA and 7x our FY20 forecast, we do not believe the shares reflect the tremendous organic growth that the company is showing, and which we believe could be accelerating,” the analyst adds.