Three Canadian digital health stocks with Buy ratings

It’s a space that’s expected to see accelerated growth for years to come as physicians, clinics, hospitals and health units join the digital transformation that has already overtaken a number of sectors. For healthcare, the development means using information technology-based solutions and services to better facilitate all facets from team communication and data analytics to the use of artificial intelligence to improve diagnostics and procedures. And Canadian companies are playing a role in the revolution on a number of levels, leaving investors with lots of options in digital healthcare. 

Cantech Letter has three such healthcare picks for your portfolio, starting with Carebook Technologies (Carebook Technologies Stock Quote, Charts, News, Analysts, Financials TSXV:CRBK), a digital health solutions and virtual care company with a COVID-19 vital signs screening tool and operations in three verticals: pharmacy, virtual care and insurance. 

Carebook recently appointed a new CEO in Michael Peters, with iA Capital Markets analyst Chelsea Stellick saying that once management’s capital discipline gets established the market should begin to highlight the strengths of Carebook’s business.

“We believe the new CEO of Carebook has correctly identified and prioritized the upcoming steps that will be taken to shift market sentiment, namely acquisition integration, capital discipline, upselling, cross-selling, signing new pharmacy solution customers, and further M&A, in that order. The underlying technology and team are in place, and we will watch closely for progress on these clear objectives as new management focuses the strategy,” Stellick wrote in a client report on September 23. 

With her report, Stellick maintained both her “Buy” rating and $1.60 target for CRBK, which at press time represented a 12-month return of 113 per cent.

Next up is WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL), which operates through a number of verticals, including telemedicine services in Canada and the US, health clinics, an electronic medical records (EMR) business, an anesthesia business across the US, a health app platform as well as cybersecurity solutions. 

WELL Health saw its share price zoom up in 2020, with the stock laying low for much of this year. But Haywood Securities analyst Colin Healey sees a health sector growth engine with a solid track record of execution.

“WELL continues to evolve, rapidly growing its revenue, market footprint and underlying financial metrics organically and through its acquisition strategy,” said Healey in a September 23 update to clients. 

“Following the recent close of a slew of acquisitions, WELL still has around $70 million in cash to continue consolidation with multiple LOIs currently in place. We expect the company, with a current annualized run rate of about $400 million in on track for topline growth in excess of 450 per cent in 2021 and even more in 2022. On that basis, we continue to like WELL, underpinned by strong management and evolving technical offerings,” Healey said.

With his report, Healey maintained his “Buy” rating and $12.00 target for WELL, which at the time of publication represented a projected return of 57 per cent.

Finally, CloudMD Software & Services (CloudMD Software & Services Stock Quote, Charts, News, Analysts, Financials TSXV:DOC) is the owner of onsite clinics and telemedicine services as well as an IT solutions platform for clinical practitioners. 

Total revenues as per its latest quarter were $15.7 million with adjusted EBITDA just below the line at negative $0.7 million and after a number of acquisitions over the past year the company’s annualized revenue run rate is now over $140 million.

Research Capital Corporation analyst Yue Ma has given CloudMD a “Buy” rating, maintaining the rating and target price of $3.30 per share in a late August update to clients. Ma said with its three verticals established in clinic services and pharmacies, digital services and enterprise health solutions, CloudMD has solid growth prospects.

“DOC closed multiple acquisitions during 2020 and H1 2021, establishing an ecosystem of various product offerings and a large client base, creating significant cross-selling opportunities. DOC continues integrating those newly acquired businesses – based on which the company has launched a Complete Health Platform that targets approx. 260K employees covered by existing sales contracts in digital services and EHS,” Ma wrote.

“During the pilot phase, 11K employees have been onboarded to the platform and achieved a retention rate of 48 per cent and a satisfaction score of 73 per cent – above DOC’s expectations. We believe the initial success of the Complete Health Platform should attest to the feasibility of DOC’s organic growth strategy – boding well for future growth,” Ma said.

CloudMD’s share price is down about 40 per cent for the year so far, but Ma is expecting upside to the name, with his $3.30 target representing at the time of publication a projected one-year return of 76 per cent.

Disclosure: Jayson MacLean and Nick Waddell own shares in WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.