Still more upside to Viemed stock, says Beacon

Beacon Securities analyst Doug Cooper is staying bullish on Viemed Healthcare (Viemed Healthcare Stock Quote, Charts, News, Analysts, Financials TSX:VMD), saying in a Tuesday report that even with another record quarter under its belt the in-home medical equipment company now has the infrastructure in place to deliver much higher sales numbers.

Viemed, which supplies home respiratory services to patients with various respiratory diseases such as COPD and neuromuscular diseases, reported its first quarter 2023 financials on Monday, showing revenue up 31 per cent year-over-year and up six per cent sequentially to $39.6 million, a new record for the company. (All figures in US dollars except where noted otherwise.)

In his comments on the quarter, CEO Casey Hoyt said in a press release, “Our recently announced operating results demonstrate that the core business is firing on all cylinders. We are excited to amplify our robust organic growth through accretive acquisitions that create powerful revenue synergies, diversify our offerings, and build upon strong relationships with stakeholders.”

Viemed’s share price has been on a tear over the past 12-14 months. After bottoming out around C$5 in March 2022, the stock has been on a steady rise and topped out at just under C$16 last month. 

But Cooper sees more upside from here. The analyst maintained a “Buy” rating and 12-month target of C$19.75, good for a projected return at the time of publication of 42 per cent.

“For the quarter, revenue was above the high-end of management’s revenue guidance range of $38-$39 million and was +31 per cent year-over-year (ex-Covid sales last year) and +23 per cent year-over-year even including the $2.1 million of Covid sales in Q1/FY23,” Cooper said.

The analyst noted that the Q1 was VMD’s last with year-over-year comps that include COVID-related sales, and so the coming second quarter “will be a true year-over-year apples-to-apples” comparison, he said.

Cooper said the Q1 saw Viemed hit all-time highs on a number of key performance indicators. Core revenue excluding COVID revenue was an all-time high at $39.6 million; organic growth was 31 per cent year-over-year and 5.5 per cent sequentially; Viemed registered record ventilation patients at 9,337, up 11 per cent from a year earlier; there was record revenue diversification, with non-ventilation revenue representing 36.4 per cent of the total versus, for example, non-vent revenue in Q1 2021 of 20 per cent; and finally, Viemed scored record revenue per active ventilation patient at $16,980 versus $14,328 a year ago, good for an 18.5 per cent improvement.

Viemed’s M&A prospects are also looking good, according to Cooper.

“In addition to these positive KPIs, Viemed ended the quarter with excellent balance sheet with $23.4 million in cash, up from $16.9 million as of December 31, 2022 and was debt free,” Cooper wrote.

“VMD’s balance sheet is still massively under-levered (debt/EBITDA of ~0.1x), which can fuel further acquisitions. With the balance sheets of Adapthealth Corp and Owens and Minor, the competition for acquisitions is likely significantly lower than it was a few years ago,” he said.