Quipt Home Medical is a double, says Raymond James

Raymond James analyst Rahul Sarugaser is quick to keep his praise of Quipt Home Medical Corp. (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:QIPT), maintaining an “Outperform 2” rating and $9/share target price for a projected return of 104.5 per cent in an update to clients on Tuesday.

Based out of Cincinnati, Ohio, Quipt Home Medical provides in-home medical equipment and supplies, and respiratory and durable medical equipment in 87 locations covering 18 states in the US.

Sarugaser’s latest summation comes after the company released its second quarter financial results for the 2022 fiscal year on Monday night, headlined by $33.6 million in revenue for a year-over-year increase of 13.9 per cent, though it was a slight miss in relation to the Raymond James projection of $35.6 million, along with the consensus forecast of $34.6 million. (All figures are in US dollars including share price.)

Similarly, the company’s adjusted EBITDA came in at $7.1 million for an implied margin of 21.1 per cent; while being an improvement over the $6 million in reported in the same quarter of 2021, it was again a miss when compared to the Raymond James forecast of $8.2 million, as well as the consensus estimate of $7.4 million.

However, net income shone through Quipt in the quarter, as the company’s report of $5 million was significantly ahead of the Raymond James estimate of $1.3 million and the consensus projection of a $1 million loss, while also being a material improvement on the $2.2 million net income loss reported in the same quarter of 2021.

All told, the company exited the quarter with $17.8 million available in cash on hand, along with a $20 million credit facility, contrasted with debt of $15.8 million.

“We are extremely proud of the robust results we experienced in our fiscal second quarter which showed accelerating momentum across our heavily weighted respiratory product mix as the quarter progressed. Looking to the beginning of the fiscal third quarter, we are pleased to report we had the highest level of CPAP inventory since the recall began and have seen a positive inventory trend continue in real time,” said CEO and Chairman Greg Crawford in Quipt’s May 16 release. “Moreover, demand remains very strong for at-home respiratory care which will continue to foster consistent financial performance. This strong demand coupled with an extremely bullish regulatory environment, provides us the ability to drive our organic and inorganic initiatives over the near term, and we are working diligently to progress on our plan of becoming a leader in clinical respiratory care throughout the United States.”

Quipt has been busy since the end of the reporting period, having completed the acquisition of Good Night Medical in April to add $7.5 million in revenue with a 20 per cent adjusted EBITDA margin and over 10,000 active patients in three new markets, as well as securing a national contract with a top-five American healthcare provider.

The company has also been working to tackle its backlog stemming from Philips Respironics CPAP and BiPAP recalls through the U.S. dating back to June 2021, leading to nationwide equipment shortages.

“We are glad to see this backlog reduced through 2Q22, with 6,500 patients in queue for devices as at Mar. 31, and QIPT reporting its highest CPAP inventory levels since the recall began,” Sarugaser said. As inventory levels continue to improve through 2H22, we anticipate QIPT improving on its already solid organic growth profile.”

With the new financial results now public, Sarugaser maintains a $150 million revenue target for 2022 (September year-end), which would mark a year-over-year increase of 47.1 per cent. Looking ahead to 2023, Sarugaser forecasts revenue to jump to $232 million for a potential year-over-year increase of 54.7 per cent.

From a valuation perspective, Sarugaser forecasts the company’s EV/Revenue multiple to drop from the reported 1.3x in 2021 to a projected 0.9x in 2022, then to a projected 0.6x in 2023.

Meanwhile, Sarugaser forecasts the company’s adjusted EBITDA for 2022 to come in at $34 million for an implied margin of 22.7 per cent, followed by a 2023 forecast of $53 million for an implied margin of 25 per cent.

In terms of valuation, Sarugaser estimates the company’s EV/EBITDA multiple will drop from the reported 7.7x in 2021 to a projected 4.9x in 2022, then to a projected 3.1x in 2023.

Quipt’s share price has gone for a 24 per cent loss to this point so far in 2022, hitting an early peak of $5.89/share on January 11 and recently dropping to a 2022 low of $4.09/share on May 12.