Centric Health (Centric Health Stock Quote, Chart, News TSX:CHH) is one beaten up stock you might want to look at.
The healthcare company had been mired in debt for a number of years but has recently made moves to right the ship, says Stephen Takacsy of Lester Asset Management, who calls Centric a Top Pick for 2020.
Toronto-based Centric Health provides specialty pharmacy services to seniors through a network of fulfillment centres, now covering over 31,000 residents in hundreds of seniors communities across the country.
The company had leverage issues but this past November Centric sold its surgical business for $35 million while also completing a $35.24-million private placement.
The moves give Centric more power to grow their business, said Takacsy, CEO and chief investment officer at Lester Asset Management, who appeared on BNN Bloomberg Monday.
“They’re one of Canada's leading distributors of medication to the institutional market, so long term care facilities retirement homes, a good demographic play,” said Takacsy.
“And what's new about this company, of course, is they've really cleaned up their act.”
“They’ve sold all these other businesses they were in, they’ve hired a new CEO who was a former president of Cardinal Health and he's done a great job in cutting out all the fat and growing the margins of their core distribution business,” Takacsy said.
Centric last reported its quarterly financials in November where its third quarter ended September 30, 2019, featured specialty pharmacy revenue up 12.4 per cent to $31.4 million, with the average number of beds serviced climbing by 7.7 per cent to 31,281.
Centric’s adjusted EBITDA in Specialty Pharmacy grew by a whopping 204.1 per cent to $4.0, while the EBITDA margin grew to 12.9 per cent versus 4.8 per cent a year earlier. Adjusted EBITDA from continuing operations went to $2.8 million for the Q3 versus a loss of $42,000 last year.
“Our momentum continued in the third quarter, with strong growth in revenue and beds serviced, and significant growth in Adjusted EBITDA for our core Specialty Pharmacy business,” said David Murphy, President and CEO, in a press release.
Centric traded as high as $0.91 per share in early 2017 but the story has been pretty much one of disappointment since, with the stock treading water around the $0.15 per share mark over the past few months. Centric finished 2019 down 45 per cent and has been basically flat for 2020.
Takacsy says this year should be much better for Centric.
“They’ve cleaned up their balance sheet, which is why the stock came down, and they did a huge equity issue at 12 cents. But now their balance sheet is in great shape and they're and they're in a good position to make acquisitions to consolidate the space which is very, very fragmented. And there's also some great organic growth potential,” the fund manager added.
“I think this stock can do extremely well this year. They're their main shareholder is also a large health care fund that owns stakes in retirement homes and healthcare facilities,” he said.