Premier Health of America is a buy, Leede Jones Gable says

Looking for a digital healthcare stock that can deliver big returns? look no further than Premier Health of America (Premier Health of America Stock Quote, Chart, News, Analysts, Financials TSXV:PHA), says Leede Jones Gable analyst Douglas Loe.

In a research report to clients January 31, Loe initiated coverage of PHA with a “Buy” rating and one-year price target of $1.25.

Loe listed some of the reasons he likes the stock.

“Strong margin profile in a healthcare services niche constitutively burdened by escalating expenses and funding pressure, two elements that Premier Health’s focus on expanding scale/scope of operations can offset,” he said. “Broadly, the employment services industry generates what we view as a relatively low margin profile ranging from 4-5%, as demonstrated from recent Statistics Canada data. In contrast, PHA has been able to sustain operating margin at ultrasonically higher levels (+25% gross margins/ +9.3% average quarterly EBITDA margin) despite being highly specialized in its field.”

The analyst says the company is acquisition oriented but shows strong organic grwoth ability.

“Sizable BC-based acquisition should drive sequential revenue/EBITDA growth through F2024, even without any new acquisitions overtly embedded into our forecasts. Premier substantially augmented its national healthcare staffing platform last year by acquiring BC-based Solutions Staffing, which our model assumes can augment quarterly revenue/EBITDA to levels that the acquired firm achieved as a private standalone organization (about $18.5M/$1.7M, respectively, or $74M/$6.7M annualized). We expect this acquisition to be immediately accretive to revenue/EBITDA as soon as in the next fiscal period (FQ124 ending in Dec/23).”

Loe ran down his financial forecast for PHA’s forthcoming quarter.

We are projecting FQ124 revenue/EBITDA of $40.9M/$3.9M, up sequentially from $23.4M/$2.2M and all prior quarters,” he wrote. “Our F2024-to-F2026 revenue/EBITDA forecasts assume that Premier Health can sustain EBITDA margin at or above trailing levels (average EBITDA margin during the FQ121-to-FQ423 period is 8.8%) even though we do expect some sequential EBITDA margin pressure during the early days of Solutions Staffing integration in FH124.”

At press time, shares of PHA were up 3.3 per cent to $0.47.