Tough market? Beat it with these healthcare stocks, says Leede Jones Gable

Healthcare stocks did great over the 2019 and 2020 pandemic years, but since about mid-2021 the sector has stalled. 

But investors can still find gems in the space if they know where to look. And analysts at investment firm Leede Jones Gable have got you covered with the following three stocks, all of them coming with recent “Buy” ratings.

First up is Quipt Home Medical (Quipt Home Medical Stock Quote, Charts, News, Analysts, Financials TSXV:QIPT), which offers home respiratory care equipment and services in its US-based business.

Leede Jones Gable analyst Douglas W. Loe says that Quipt, which recently made a major acquisition in Great Elm Healthcare, should deliver more M&A goodies up ahead, making investors perk up at the company’s growing top and bottom lines.

“Our model assumes that EBITDA and margin stability can be sustained throughout our forecast period and thus through F2023/24, though we are optimistic that the firm can continue to identify attractively-valued respiratory equipment distribution peers with available cash and its credit line, while preserving strong EBITDA margins in the process,” Loe wrote in a May 16 report.

Loe is calling for QIPT to generate full fiscal 2023 revenue of $216.0 million and 2024 revenue of $237.8 million, while on EBITDA, he is forecasting $48.4 million in fiscal 2023 and $53.7 million in 2024. 

Loe had reiterated a C$16.25 price target which at the time of his report represented a projected one-year return of 86.6 per cent.

“We are confident that capital markets will in time recognize the operating excellence that makes margin stability like this happen in an acquisition-laden background, and this prediction is a major element fuelling our positive regard for Quipt and its market value potential,” he said.

Next up is Salona Global Medical Device Corp (Salona Global Medical Device Stock Quote, Charts, News, Analysts, Financials TSXV:SGMD), which is an acquisition-oriented business focused on the aging demographic, again in the US but also internationally. 

Salona did well in its most recently reported quarter, according to Leede Jones Gable’s Greg McLeish, who in a May 17 note to clients called the company’s Q1 solid, while recent acquisition of recovery science medical device company Arrowhead is right in Salona’s wheelhouse and adds a known global brand to its stable.

“Salona plans a cross-selling strategy post-acquisition with the aim to increase revenues by offering its Mio-Guard athletic training market products to the large existing Biodex customer list while offering Biodex physical medicine products into its current sales channels,” McLeish wrote.

McLeish has estimated Salona’s revenue going from $33.6 million in 2022 to $66.2 million in 2023 and to $76.7 million in 2024. On EBITDA, the analyst has forecasted $4.0 million in 2023 and $6.7 million in 2024. The analyst maintained a $1.50 target price on SGMD, which at the time of publication represented a one-year projected return of 500 per cent.

Finally, analyst Douglas Loe also likes medical device company Profound Medical (Profound Medical Stock Quote, Charts, News, Analysts, Financials NASDAQ:PROF), which is commercializing a technology for the ablation of prostate cancer tissue in the US market. 

The company recently received CPT reimbursement codes for its technology, the TULSA-PRO, which will help with sales and uptake, according to Loe, who raised his target on PROF from US$14 to US$18 in a June 5 report.

“The new codes will be effective at the beginning of FQ125 and so will not have a direct impact on our F2023/24 TULSA-PRO revenue forecasts. With the codes squarely now in sight and AMA-endorsed, we believe that unit sales could dramatically accelerate in the next seven quarters, including to Profound’s existing strategic imaging partners in CA-based RadNet and FL-based Akumin,” Loe said.

Loe has forecasted revenue and EBITDA in 2023 for Profound Medical of $26.8 million and negative $8.5 million, respectively. At press time, his US$18 target represented a one-year return of 34 per cent.