CRRX stock keeps “Buy” rating at Echelon

Following the company’s most recent results, Echelon analyst Stefan Quenneville has maintained his “Buy” rating on CareRx (CareRx Stock Quote, Chart, News, Analyst, Financials TSX:CRRX).

On March 7, CRRX reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $7.5-million on revenue of $91.1-million, a topline that was down from $93.8-million in 2022.

“In 2023, we made tremendous progress to deliver on our operational optimization program and further strengthen our financial position,” said Puneet Khanna, president and chief executive officer of CareRx. “As evidenced by our third consecutive quarter of adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] growth and the improvement in our adjusted EBITDA margin, our focus on increasing productivity and driving efficiencies has better positioned CareRx to deliver sustained and accretive growth. Through our industry leadership position, we will continue to generate value for our shareholders, stakeholders and customers by providing exceptional pharmacy services to the rapidly expanding seniors living sector.”

In a research update to clients March 7, Quenneville maintained his “Buy” rating and price target of $5.25 on CRRX, implying a 220 per cent return.

The analyst summarized the quarter.

“CareRx reported Q423 results that were ahead of consensus on adj. EBITDA despite missing on the topline as the company’s efficiency initiatives appear to be bearing fruit as adj. EBITDA margins continued to improve towards guidance of reaching 10% by the end of 2024,” he wrote. “We are maintaining our Buy rating and $5.25/shr PT on CRRX as secular tailwinds and compelling organic and inorganic growth opportunities remain in place and we believe it remains an undervalued opportunity for investors given its leading competitive position in the senior care pharmacy space in Canada.”

Quenneville thinks CRRX will post Adjusted EBITDA of $33.3-million on revenue of $369.8-million in fiscal 2024.

“While we have made some slight adjustments to our model to reflect a more back—end loaded 2024 for bed growth as additional contracts come online in H224, our outlook remains materially unchanged,” the analyst concluded. “As such, we are maintaining our Buy rating and $5.25/shr PT based on an 11.5x 2024E EV/EBITDA multiple, which is in line with the peer average of 11.5x.”