Viemed gets a target boost from Beacon

With a perfect hammock of a stock chart over the past two years, investors may be wondering how much further rise there is to Viemed Healthcare (Viemed Healthcare Stock Quote, Charts, News, Analysts, Financials TSX:VMD). Quite a bit, says Beacon Securities analyst Doug Cooper, who reviewed Viemed’s latest quarterly numbers in an update on Wednesday, saying strong organic growth combined with a potentially supercharged M&A program could spell plenty of upside.

Viemed, which has respiratory home care medical equipment services in the US, announced last week its fourth quarter and full year 2022 financials. Viemed’s $37.5 million Q4 topline was a record and represented a 30 per cent year-over-year increase, while adjusted EBITDA was at $9.3 million compared to $9.5 million a year earlier. (All figures in US dollars except where noted otherwise.)

“The healthcare market and regulatory environment are stabilizing and we are at an inflection point of opportunity for both organic and inorganic growth,” said CEO Casey Hoyt in a press release. “I’m extraordinarily proud of the current state of our organization and very excited about upcoming opportunities to treat a rapidly expanding patient base.”

Looking over the results, Cooper said the quarterly revenue arrived at the midpoint of management’s guidance, while EBITDA was above expectations and saw a margin expansion of about 500 basis points on a sequential basis, as the company logged more sales and reduced SG&A expenses by $0.5 million.

Cooper said the quarter saw record ventilation patients at 9,306, up 11 per cent year-over-year, and record revenue per active ventilated patient at $16,124 versus $15,212 last year. Meanwhile, Viemed’s organic growth was strong at 40 per cent year-over-year and up five per cent sequentially.

“Last quarter, we noted that the key performance indicators had hit an all-time high. That momentum continued with the Q4 results,” Cooper wrote.

“Annual results are always a good time for reflection and taking stock as to how a company has performed over time. For VMD, such analysis reveals how successful the company has been since it started trading on a stand-alone basis in 2018,” he said.

Moreover, Cooper said the future is still looking bright and he pointed out that Viemed’s total installed base of about 100,000 patients still represents less than ten per cent of the applicable market. Cooper said clinical studies have been showing the efficacy of non-invasive ventilation (NIV) therapy as well as the cost savings, and physicians are becoming more comfortable with the approach, leading to an acceleration in patients.

Added to that, Cooper said Viemed is likely to make an acquisition for the first time in its history, in aid of expanding its footprint.

“An M&A strategy to augment its 20-30% organic growth could act as catalyst to the share price. Consider if it were to buy a company with $30+ million in revenue at a 20 per cent EBITDA margin through the use of its untapped $90 million credit facility. We believe such an accretive transaction could be worth C$2 to the share price alone,” he said.

Over the past two years, Viemed’s share price has gone from $13 to a low of $5 a year ago to now back at about $12.50. With the update, Cooper maintained a “Buy” rating while raising his target from C$15.75 to C$18.00, representing at press time a projected one-year return of 45 per cent.