Echelon Wealth Partners analyst Doug Loe says recent developments in the home respiratory market are further justifying his “Top Pick” call on Protech Home Medical (Protech Home Medical Stock Quote, Chart, News TSXV:PTQ).
On Monday, Protech announced it had received a $1.5-million in cash payment as part of the CARES Act Provider Relief Fund to support health care providers fighting the COVID-19 pandemic.
The company also announced that CMS, the Centers for Medicare and Medicaid Services, had removed non-invasive ventilators from the 2021 competitive bidding program. The company said the removal was designed to ensure greater patient access for at-home ventilator therapy.
“In just a few weeks, our business has settled into a new normal,” CEO Greg Crawford said. “As we noted in our press release dated March 18, 2020, our business has been deemed essential by the U.S. government and we continue full operations during this pandemic. Since then, we have seen an uptick in demand for our at-home services. In particular, the expedited initiative by the medical community to free up hospital beds by sending non-critical patients home has accelerated physician referrals in most segments of our business. We are also pleased that the supply chain for our critical equipment continues to remain effective, and we continue to opportunistically build inventory to meet expected increases in demand, particularly for ventilators and home oxygen equipment.”
Loe said he is not surprised by this devlopment.
“US-based home respiratory equipment distributor Protech Home Medical provided another operational update in as many months this morning, reflecting favorably on how demand for its home-based respiratory equipment sales/rental operations has, unsurprisingly to us, intensified in recent weeks, while in parallel reflecting equally favorably on how removal of non-invasive ventilators (those that use a mask to attach positive oxygen pressure conferring devices to the face, and not those that deliver oxygen directly into the lungs either through intubation or tracheostomy) from the US Center for Medicare & Medicaid Services (CMS) competitive bidding program. This CMS-based program conventionally reviews medical equipment platforms that it endorses (and thus will fund the use of) in both hospital-based and homecare markets.”
In a research update to clients today, Loe maintained his “Buy” rating and one-year price target of $2.50 on Protech Home Medical, implying a return of 247 per cent at the time of publication.
Loe thinks Protech will post EBITDA of (C) $19.4-million on revenue of $95.0-million in fiscal 2020.
The analyst said Protech is finally getting the due is deserved all along.
“That PTQ shares were valued at ever-compressed prices in recent trading sessions has been one of the biggest riddles-wrapped-in-an-mystery-inside-an-enigma that resided within our coverage universe, especially when considering Protech’s well-documented operational focus on a seminal medical market (home respiratory care) with heightened epidemiological relevance,” the analyst said. “Accordingly, we are pleased to see PTQ ricochet off trough levels and at a pace that we believe is justified by the firm’s (and our) expectations for strong revenue/EBITDA margin strength to continue in forthcoming quarters. We are accordingly maintaining our BUY rating (and Top Pick status) and PT of $2.50 on PTQ, with our valuation still based on multiples of our F2021 EBITDA/fd EPS forecasts of $24.9M/$0.10, respectively.
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