Beacon Securities analyst Doug Cooper said Quipt Home Medical Corp. (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT) currently has a very compelling valuation. In a report to clients on Friday, Cooper maintained a “Buy” rating and upped his target price from $15.50/share to $16/share for a projected return of 115 per cent.
Founded in 1993 and headquartered in Kentucky, Quipt Home Medical provides in-home monitoring equipment and disease management services including end-to-end respiratory solutions for patients with a focus on the highly fragmented and developing market of small privately-held US companies servicing chronically ill patients with multiple disease states.
Cooper’s latest analysis comes after Quipt officially closed the acquisition of At Home Health Equipment, an Indiana-based provider of home medical equipment and supplies intended to offer diverse healthcare options, including wheelchairs, walkers, transport chairs, knee walkers and rollators.
“We believe now is a good time for investors to take stock of where the company stands today, from both a financial and strategic perspective as well as understand how undervalued the company is relative to its peers in the healthcare service sector,” Cooper said.
Quipt paid $13.1 million in cash (all figures in US dollars) to acquire At Home Health, which featured trailing 12-month annual revenues of approximately $13 million and $1.6 million in net income, with anticipated Adjusted EBITDA of $2.9 million for a 22 per cent margin.
The deal adds another 15,000 active patients to the Quipt network to make approximately 170,000 overall, while also making Indianapolis Quipt’s single largest market.
Indiana is the 16th state Quipt has entered, with Cooper noting the company’s expansion plans have been smart, having recently entered Arkansas, Mississippi and Missouri which rank sixth, seventh and eighth in terms of states with the highest per capita lung conditions.
“This acquisition is very powerful as it services the significant metro hub of Indianapolis, and we plan on quickly integrating their business operations and leveraging Quipt’s payor contracts across our existing Midwest locations,” said Greg Crawford, Chairman and CEO of Quipt in the company’s January 4 press release. “We see a tremendous number of synergies and believe our strong sleep re-supply business presents us with significant upside as we deploy our technology therein. We have a goal of increasing overall efficiencies, as well as adding on our clinical ventilation therapy program as an extension to their existing respiratory product mix, representing an immediate cross selling opportunity for us.”
According to Cooper, Quipt still has one additional LOI outstanding, announced on November 22 and expected to close within the next 30 days, which would bring an additional $14 million in revenue to the company.
Company management also reiterated its previous financial guidance, including a modified annual run rate target ranging between $180 million and $190 million by the end of 2022, accompanied by EBITDA projected somewhere between $38 million and $43 million. Cooper believes that with a projected run rate of $146 million based on management guidance and new acquisitions already available, the mark is within reach on account of a robust M&A pipeline.
Also supporting Cooper’s belief is the fact that Quipt has approximately $20 million in cash on hand after the At Home Health acquisition, with a further $20 million credit facility available and with the potential of an increase to $100 million.
The confirmed acquisition also prompted Cooper to revise his financial projections, lowering his 2021 revenue projection from $103.4 million to $101.2 million, though the growth gets faster in 2022 at a projected $146.7 million (previously $128.1 million) for a potential year-over-year growth of 45 per cent, then improving to a projected $165.6 million in 2023 (previously $140.9 million) for potential year-over-year growth of 12.9 per cent.
From an EBITDA perspective, Cooper has shifted his 2021 projection to $21.5 million (previously $22.5 million) for a margin of 21.2 per cent, followed by a jump to a projected $32.3 million in 2022 (previously $28.2 million) for a projected 22 per cent margin, then moving to a forecasted $36.4 million in 2023 (previously $32.4 million), maintaining a margin of 22 per cent.
Looking at the valuation multiples, Cooper projects the company’s EV/Sales positively at 1.8x in 2021, then lowering to a projected 1.2x in 2022 and dropping further to a forecasted 1.1x in 2023. The EV/EBITDA multiple also forecasts favourably, with Cooper projecting the multiple at 8.5x in 2021, then dropping to a projected 5.7x in 2022 and 5x in 2023.
Meanwhile, on account of adjusted positive EPS projections growing as high as $0.60/share in 2023, Cooper projects the price-earnings ratio beginning in 2022 at 11.7x, with a drop to a projected 9.5x in play for 2023.
Quipt’s stock price has risen by 7.8 per cent over the last year, hitting a 52-week high of C$10.08/share on February 10.