Assessing the company’s latest quarterly results, Beacon Securities analyst Doug Cooper is staying bullish on healthcare penny stock Protech Home Medical (Protech Home Medical Stock Quote, Chart TSXV:PTQ).
In a client update on Tuesday, the analyst maintained his “Buy” rating and C$2.50 target price while noting that a multiple expansion could be upcoming for the stock.
Cincinnati-based in-home monitoring and disease management services company Protech delivered its third quarter fiscal 2019 results on August 19, posting revenue for the quarter ended June 30, 2019, of $21.1 million, a 7.1-per-cent year-over-year increase, and adjusted EBITDA of $3.9 million, a 7.8-per-cent year-over-year jump. (All figures in US dollars unless otherwise noted.)
U.S. expansion for Protech Home Medical
Protech saw its respiratory resupply or set-up deliveries go up 7.7 per cent over the Q3, with management highlighting the company’s expansion of its sales team across four US states.
“We continue to focus on achieving solid organic growth and on enhancing the profitability of our core operations,” said CEO and chairman Greg Crawford in the quarterly press release. “We continue to achieve these solid financial results while also improving on all aspects of our business operations.”
Cooper says Protech’s quarter arrived largely in-line with forecasts, calling the results very solid. At the same time, the analyst pointed out that a number of non-recurring factors negatively impacted what could have been an even better quarter, including a cyber-theft of $9.2 million that was announced on May 7. That event has apparently reached a happy conclusion, however, as management recently reported that the company has received a final Garnishee Order Absolute in Hong Kong which will mean the return of C$8.6 million plus accrued interest sometime over the next several weeks.
Loe: “We continue to be very bullish as to healthcare service companies in general (driven by aging demographics) and PTQ in particular,”
Other than the cyber-theft, Protech’s quarter also featured an upgrade to its respiratory re-supply business and a product recall in a non-core segment, together combining for about $0.5 million in lost revenue and about a $0.3-million EBITDA hit.
“We continue to be very bullish as to healthcare service companies in general (driven by aging demographics) and PTQ in particular,” writes Cooper. “Given the positive macro tailwinds, strong margin profile and improving balance sheet, we remain comfortable with our current forecast. Note that we have not factored any acquisitions into our model. With continued strong results, we believe a multiple expansion is in the offing.”
Cooper is calling for fiscal 2019 revenue and EBITDA of $88.7 million and $16.9 million, respectively, and fiscal 2020 revenue and EBITDA of $104.1 million and $20.8 million, respectively. His C$2.50 target on the healthcare penny stock represented a projected 12-month return of 201 per cent at the time of publication.
Earlier this year, Protech announced the closing of a $15-million bought deal financing round, with the company saying that the proceeds will go towards debt repayment, working capital and general corporate requirements.
Protech’s share price has been up and down over the past year and a half. Currently, the stock is up 35 per cent year-to-date.