CareRx stock has a 119 per cent upside, says Echelon

The company comes with a few challenges, but the CEO expected to take over pharmacy services name CareRx (CareRx Stock Quote, Charts, News, Analysts, Financials TSX:CRRX) looks like a good fit for the job. That’s the take from Echelon Capital Markets analyst Stefan Quenneville, who provided an update to clients on the company on Tuesday.

CareRx, which has a network of pharmacy fulfillment centres serving seniors facilities across Canada, announced on Monday that current President and CEO David Murphy will be stepping down at the end of May to pursue another employment opportunity. Current COO Puneet Khanna is expected to take Murphy’s place in the driver’s seat.

Quenneville said the announcement was unexpected but he foresees a relatively smooth transition for CareRx. He said while not announced the understanding is that Murphy is moving onto a CEO role at a larger, non-competing Canadian healthcare organization. On Khanna, the analyst said his more than 20 years of pharmacy and senior care sector experience will serve him well and help make the transition seamless.

“We are maintaining our Buy rating on CRRX as secular tailwinds and compelling medium- and long-term organic and inorganic growth opportunities remain in place and continue to believe it remains compelling value for long-term investors given its competitive position and margin expansion potential,” Quenneville wrote.

On CareRx’s stock, Quenneville maintained a $5.25 target price, representing a projected one-year return of 119 per cent and stemming from a 11.5x 2023 EV/EBITDA multiple, which the analyst says is in line with the company’s North American peers.

“Given that CareRx currently trades at 7.2x, we continue to believe that the stock represents compelling value at current prices,” he said.