VitalHub wins target raise at Eight Capital

Following the company’s fourth quarter results, Eight Capital analyst Christian Sgro has raised his price target on VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI).

On March 21, VHI reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $3.99-million on revenue of $13.6-million, a topline that was up 20 per cent over the same period a year prior.

“As Vitalhub closes another quarter, it’s with a great sense of achievement that we reflect on the strides we’ve made,” CEO Dan Matlow said. “Our Q4 2023 revenue reached $13,603,419, marking a 20-per-cent increase over the same period last year. This growth underscores the successful execution of our strategy and the unwavering dedication of our team. Q4 gross profit as a percentage of revenue improved to 83 per cent, up from 82 per cent in the prior-year quarter, demonstrating our ability to enhance margins while expanding our service offerings. This is a reflection of our growing recurring revenue base to 83 per cent of revenue compared to 77 per cent in the prior year quarter. We achieved annual recurring revenue (ARR) of $44,573,739, a testament to our robust business model and the trust our clients place in our solutions. ARR increased 23 per cent over the same period last year. The bulk of this ARR growth, $6,387,730 or 18 per cent, was organic, $1.1-million or 3 per cent was from acquisitions, and $938,859 or 3 per cent was from currency fluctuations. Significantly, our EBITDA for Q4 surged by 536 per cent to $2,992,273 and our adjusted EBITDA (non-IFRS measure) saw a 62-per-cent increase to $3,985,553. These figures are a clear indication of our operational efficiency and the scalability of our platform. Notably, our net income before taxes stood at $1,984,246, illustrating a substantial improvement from the previous year and underscoring our fiscal health and the effectiveness of our growth strategies.”

The analyst summarized the quarter.

“VitalHub reported strong Q4/23 results, with 18% organic ARR growth and a recent record 29% adj. EBITDA margins,” he wrote. “With shares gapping higher in recent months, we believe the current target price better reflects the scale and quality of the software profile of the business. We think there is continued upside potential from ongoing execution (against our increased and more aggressive software growth estimates) and M&A, which will add scale. With US Private Equity actively acquiring Canadian technology companies, we see VitalHub’s software profile as prime for a similar takeout situation.”

In a research update to clients March 25, Sgro maintained his “Buy” rating but raised his price target on VitalHub from $6.25 to $8.50.

The analyst thinks VHI will post Adjusted EBITDA of $16.3-million on revenue of $59.7-million in fiscal 2024. He expects those numbers will improve to Adjusted EBITDA of $18.8-million on a topline of $66.3-million the following year.