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Viemed Health is clearly a Buy right now, says Beacon


It’s full steam ahead for Viemed Healthcare (Viemed Healthcare Stock Quote, Charts, News, Analysts, Financials TSX:VMD), according to Beacon Securities analyst Doug Cooper, who reviewed the company’s latest quarterly results in an update to clients on Wednesday. Cooper maintained a “Buy” rating on the stock, saying continued strong organic growth and the stock’s currently low trading levels make Viemed a great opportunity.

In-home medical equipment and respiratory healthcare services company Viemed reported its third quarter financials on Tuesday, showing revenue up 28 per cent year-over-year to $35.8 million and adjusted EBITDA of $7.0 million compared to $7.4 million a year earlier. (All figures in US dollars except where noted otherwise.)

Viemed said it increased its ventilator patient count over the quarter by 11 per cent from a year ago to 9,127 patients, while the company continued its share buyback program, repurchasing and cancelling about 1.7 million shares at a cost of $8.9 million. The company ended the Q3 with a cash balance of $21.5 million and management guided for fourth quarter revenue to be between $37.1 and $38.1 million. 

“The momentum behind patient and service expansion continues to exceed expectations and we have successfully reversed margin compression in EBITDA,” said Casey Hoyt, CEO, in a press release. “Looking forward, our inflation-adjusted reimbursement environment combined with tactical cost containment initiatives have the Company incredibly well positioned to outperform during the upcoming business cycle.”

Commenting on the Q3 results, Cooper said Viemed’s key performance indicators continued to look great, with core revenue (excluding COVID) hitting an all-time high, significant organic growth at 29 per cent year-over-year and 7.5 per cent sequentially, with record ventilator patient count, record revenue diversification and record revenue per active ventilated patient at $15,924 per patient compared to $13.656 a year ago.

“The Q2 and Q3 results show a return to 20 per cent+ growth, which is expected to continue into Q4. We also believe there is a high degree of visibility on future revenue,” Cooper wrote. 

“While its Q2 EBITDA margin dipped to 19.3 per cent, primarily due to a material increase in headcount, its Q3 margin rebounded to 20 per cent. As that increased headcount (ie. sales people) becomes more productive and drives sales in new areas (+34 per cent y/y), we believe its EBITDA margin will continue to benefit from scale and increase to 22 per cent+. We believe this will be apparent again with the Q4 results, which could increase by a further 100+ basis points,” he said.

Cooper estimated VMD to be currently trading at 5.8x 2023 EV/EBITDA, which he said is below both Viemed’s own historical multiple as well as the historical range of healthcare service companies at 8-12x.

“In our view, it is no wonder that the company continues to repurchase shares,” Cooper wrote.

With his “Buy” rating, Cooper maintained a C$15.75 target price, which at press time represented a projected one-year return of 80 per cent.


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