Buy these Canadian healthcare stocks for big returns, analysts say

Is there a bigger, more important space than healthcare right now?

With various levels of government playing catch up when it comes to most aspects of patient care, startups are rushing to fill the void with digital solutions.

Both here and in the United States, some healthcare stocks have rewarded shareholders handsomely. But analysts still think there is upside to be had in heathcare and healthtech stocks, particualrly in light of the tough market conditions since the Covid-19 pandemic brought them to light.

We bring you three heathcare companies that analysts think can make you money right now.

CareRX

Pharmacy services company CareRx Corp (CareRx Corp Stock Quote, Charts, News, Analysts, Financials TSX:CRRX) delivered mixed results in its latest quarter, according to Echelon Capital Markets analyst Stefan Quenneville. But at current trading levels, the stock still looks like a good pickup, Quenneville argued in a recent report to clients where he maintained his “Buy” rating and $5.25 target.

CareRx’s revenue was slightly ahead of estimates, according to Quenneville, where the $94.5 million result compared to a $92.6 million forecast from Echelon and a $93.2 million consensus forecast. Adjusted EBITDA was a miss, however, with the $7.0 million result comparing to the $7.4 million forecast from Quenneville and $7.3 million from the Street.

CareRx operates a network of pharmacy fulfillment centres serving seniors facilities across Canada.

At the same time, Quenneville said CareRx has put in efficiency and automation initiatives which are beginning to take hold which will help margins going forward. And structural tailwinds are in its favour, as well.

“We are maintaining our Buy rating and $5.25 price target on CRRX as secular tailwinds and compelling organic and inorganic growth opportunities remain in place and we continue to believe it remains compelling value for long-term investors given its leading competitive position,” Quenneville wrote.

For the upcoming third quarter, Quenneville is forecasting revenue of $95.2 million and adjusted EBITDA of $7.5 million. At press time, his $5.25 target implied a one-year projected return of 144 per cent.

QUIPT Home Medical

Following the company’s third quarter results, Raymond James analyst Rahul Sarugaser has trimmed his price target on Quipt Home Medical (Quipt Home Medical Stock Chart, News, Analysts, Financial TSXV:QIPT) but the analyst still thinks there is money to be made on the stock.

On August 14, QIPT reported its Q3, 2023 results. The company posted Adjusted EBITDA of $13.9-million on revenue of $60.3-million, better than the same period in 2022, when it posted EBITDA of $7.7-million on a topline of $36.7-million.

The revenue figure was a 64 per cent beat over 2022’s Q3.

“Net net, this was a strong operational quarter for QIPT, now closing in on a ~US$250 mln annualized Rev. run-rate,” the analyst said. “To this end, we expect QIPT’s now-sizable Rev., combined with its impressive patient base—QIPT is solidly the 5th largest respiratory care provider in the U.S.—will, increasingly, catch the attention of larger players in the space (Exhibit 1), potentially becoming a large enough thorn in their side during the next year or two to motivate action (acquisition/strategic partnership, etc.)”

In a research update to clients August 16, Sarugaser chopped his price target on QIPT from $11.00 to $10.00, but maintained his “Outperform 2” rating on the stock. The analyst attributed the move to a “healthcare services sector derating”.

WELL Health Technologies

Stifel analyst Justin Keywood reported in July on the latest from Canadian health tech company WELL Health Technologies (WELL Health Technologies Stock Quote, Charts, News, Analysts, Financials TSX:WELL) and reiterated a “Buy” rating on the stock. Keywood said investors will want to own shares in WELL for both its M&A and organic growth potential.

WELL owns primary care and related clinical assets in Canada and the United States as well as a 15 per cent electronic medical records market share in Canada along with cybersecurity and virtual healthcare assets.

On his investment thesis for WELL, Keywood said recent transactions are adding valuable SaaS revenue and that the M&A pursuit has become much more valuable with changes in telehealth billing codes. He added that WELL’s growing clinic portfolio gives it a unique situation from which to develop and test new technologies before further expansion.

On its organic growth potential, Keywood said, “WELL can roll out its acquired and developed technologies across Canada and into the U.S., leading to possible accelerated organic growth. The company can also increase organic growth at its clinics by adding additional doctors to fill extra available capacity that now includes virtual visits.”

With his “Buy” rating, Keywood maintained a target price of $13.50 per share, representing at press time a projected return of 195 per cent.

Disclosure: Jayson MacLean and Nick Waddell own shares of WELL Health Technologies and WELL is an annual sponsor of Cantech Letter.