Still more upside to Quipt Home Medical, says Beacon

After an exceptional first quarter, look for Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT) to continue to outperform. That’s the take from Beacon Securities analyst Doug Cooper, who delivered an update to clients on the stock on Monday. 

Shares of Quipt, which serves chronically ill patients with multiple disease states, climbed 50.3 per cent for the Q1, rising from C$6.32 to C$9.50 per share by the end of March. That’s quite a bit higher than the TSX, which finished up 3.7 per cent, and peers like Viemed and Savaria, which were up 27.3 per cent and 14.2 per cent, respectively. 

Cooper noted that QIPT’s quarterly performance was prior to the release of its fiscal Q2 2023, expected in early May, which will see the inclusion of recent acquisition Great Elm. 

“We believe it is important, however, to also note that while Great Elm has turbocharged its growth, QIPT has been quietly growing the company through a number of ‘tuck under’ acquisitions and strong organic growth such that the company has quadrupled the size of its business over the past ten quarters WITH expanding EBITDA margins,” Cooper wrote.

The analyst believes Quipt’s fiscal second quarter could hit $56.5 million in revenue and $12.4 million in EBITDA or C$0.355 per share. (All figures in US dollars except where noted otherwise.)

Cooper pointed out that at the fourth quarter fiscal 2019, Quipt’s stock price was at C$4.50 for a market cap of about C$100 million, whereas today the market cap is at C$320 million. That means that while shares are currently up over 100 per cent and the market cap is up over 300 per cent, Quipt’s valuation multiple is unchanged on an EBITDA per share basis.

And yet, Cooper said, compared to three years ago, Quipt has quadrupled the size of its business, expanded its geographic footprint materially to become the fourth largest respiratory company in the US and recently signed its second national insurance contract, which dramatically supports growth via patient acquisition.

“Just these facts alone argue for a higher valuation multiple. Yet, QIPT continues to trade at a discount to its peer group. At C$9.00 and based on our FY24 forecast, QIPT trades at 1.3x sales and 6x EBITDA versus 1.8x and 7.1x for Viemed (15 per cent discount) and 1.5x/9x for Savaria (33 per cent discount),” Cooper wrote.

With the update, Cooper maintained a “Buy” on Quipt Home Medical and C$18.50 target, which at the time of publication represented a projected one-year return of 106 per cent.