VitalHub has a 67 per cent runway, says Beacon

The stock has gone pretty much nowhere for more than a year now but Beacon Securities analyst Gabriel Leung sees upside over the next 12 months to VitalHub Corp (VitalHub Stock Quote, Charts, News, Analysts, Financials TSX:VHI). Leung reviewed the company’s potential in a March 7 report where he reiterated his “Buy” rating and $5.00 target price, which at press time represented a projected one-year return of 67 per cent.

Toronto-based VitalHub sells and supports SaaS-based web, mobile and electronic healthcare record solutions to organizations in areas such as acute care, mental health, community health services and long-term care services. The company announced on Monday a licensing deal for its Intouch with Health division with the West Suffolk NHS Foundation Trust. 

No financial details were provided but VitalHub said the deal came out of a partner introduction from a global consulting firm providing services to the West Suffolk Foundation Trust by way of evaluating the suitability of Intouch’s Flow Management system for a hospital to be opened in four or five years, although VitalHub said the positive impression from the introduction prompted West Suffolk to implement the solution right away at its exiting sites.

“This sale marks our fourth Intouch with Health transaction announced during the quarter, further ratifying the strong demand for patient journey solutions within the NHS and providing demonstration of the leadership role VitalHub plays in this market,” said Dan Matlow, CEO of VitalHub, in a press release. 

“We look forward to working with West Suffolk to deliver a best-in-class patient flow management solution in their existing facilities, and toward assisting the Trust in planning and designing systems to support optimally efficient patient flows in their new hospital,” Matlow said.

Leung said the announcement gives him greater confidence in his near-term growth forecasts for VHI.

“As a reminder, today’s announcement represents VitalHub’s eighth contract announcement this quarter and the fifth related specifically to Intouch with Health (i.e. West Suffolk, Hampshire Hospitals, North Cumbria, South Tees, Royal Berkshire), which we believe highlights VitalHub’s continued dominance in the UK market place,” Leung wrote.

“Despite continued volatility in the overall market (both from a valuation and growth perspective), we believe VitalHub remains on track to hit our growth forecasts given its large recurring revenue base, strong M&A pipeline (with ~$13 million in cash and a $10 million unused acquisition debt facility), and the compelling valuation proposition underlying its product suite, which we believe is helping to accelerate organic adoption rates (particularly in the UK),” Leung said.

On his forecast, Leung is calling for VitalHub to deliver full 2021 revenue and adjusted EBITDA of $24.4 million and $4.6 million, respectively, and full 2022 revenue and adjusted EBITDA of $30.2 million and $6.2 million, respectively.

Leung’s $5.00 target is based on a 5.5x multiple of his 2022 EV/Sales, with the analyst estimating EV/Sales for 2021 at 4.1x and for 2022 at 3.3x. Leung’s EV/EBITDA for 2021 is estimated at 21.6x and for 2022 at 16.2x.

With a current market cap of $113 million, VHI had a great 2020 where it returned 63 per cent while last year the stock returned 16 per cent. So far in 2022 VHI is down about six per cent.

On Thursday, VitalHub announced another licensing agreement, this one with the North Middlesex University Hospital NHS Trust, which according to VitalHub represents the sixth Intouch with Health transaction announced in the current quarter alone. 

“This marks the most deals we have announced for Intouch in a comparable period, since acquiring the company,” said Matlow in a press release. “We are pleased to see the ongoing and growing market demand and penetration for our patient flow solutions, as we continue to execute on our growth strategy.”