Quipt Home Medical has more room to run, says Beacon

The stock has been rallying recently, but investors can expect even better from Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT), according to Beacon Securities analyst Doug Cooper, who provided a Friday update to clients where he maintained a “Buy” rating on QIPT, saying the respiratory industry is on an upswing.

“We know that 2022 was a difficult year for respiratory participants, driven by the Philip’s recall and supply shortages. We believe such issues have been ameliorated and that the industry will see strong growth in 2023 and beyond, driven by an aging population and augmented in 2023 by the CPI-adjusted ~8 per cent positive price adjustment,” Cooper said.

For support, Cooper pointed to equipment manufacturer Fisher and Paykel, whose shares are up over 17 per cent year-to-date, with management recently announcing an upside surprise to its financial results.

On Quipt Home Medical, the company is an acquisition-focused business aiming to consolidate in the highly fragmented US market of small, privately-held companies servicing chronically ill patients with multiple disease states. Quipt provides in-home monitoring and disease management services including end-to-end respiratory solutions.

Earlier this month, Quipt announced the acquisition of Great Elm Healthcare, which has a line of respiratory-related durable medical equipment service locations across eight states in the US Midwest, Southwest and Pacific Northwest. The purchase price was $80 million, with $73 million in cash, $5 million in assumed debt and about 432K Quipt shares. Quipt management said it has already identified $2 million in cost savings and synergies expected over the first six months and resulting in adjusted EBITDA from Great Elm of $15 million. (All figures in US dollars except where noted otherwise.)

Quipt shares were bounced to a low of about C$5.50 in mid-October of last year before starting to move upward, with the stock now trading in the C$7.50-C$8.00 range.

Cooper said the charts on respiratory stocks are showing strong price momentum and are in the middle of recapturing one-year highs.

“The industry players currently trade well below their historical multiples but we believe a multiple expansion is in the offing,” he said.

On Quipt, Cooper reiterated a C$18.50 target price, representing at press time a projected one-year return of 134 per cent.

Cooper is forecasting Quipt to deliver full year 2023 and 2024 revenue of $216.8 million and $240.5 million, respectively, and 2023 and 2024 EBITDA of $47.7 million and $52.9 million, respectively.