Evome Medical Technologies has a 360% upside, Leede says

A new development at Evome Medical Technologies (Evome Medical Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:EVMT) has Leede Jones Gable analyst Greg McLeish maintaining his bullish stance on the stock.

On April 2, EVMT announced it would sell its Simbex R&D units to football helmet technology player EB Sports for $4.83-million.

“Since July of 2023, I have worked tirelessly with our team to turn the company around,” CEO Mike Seckler said. “We started with a focus on increasing revenues and margins, which led to two consecutive quarters of positive Adjusted EBITDA. In the first quarter of the year we have focused on two strategic imperatives. First, we are reducing debt and improving our balance sheet by selling non-core business units. We will work towards continuing to make progress on our balance sheet in the second quarter. Second, we have retooled our production platform to deliver on increasing demand from our Biodex products. I believe that we have the potential to have a breakout second quarter of this year in terms of Biodex products and improvement of the balance sheet.”

McLeish notes that management believes the sale of Simbex will reduce annual revenue by $8.1-million and that the effect of the move on Net Income will be “immaterial”. The analyst says it will allow the company to focus on its high-margin Biodex product line.

“In Q4/23, Evome’s Biodex division announced two new innovative products – the Reactive Step Trainer and the SpaceTek Knee,” the analyst wrote. “These new products are designed to tap into the private physical therapy market, which has a significantly larger customer base compared to the institutional market that Biodex currently targets. The goal is to expand Biodex’s market reach and increase its customer base. The Reactive Step Trainer and SpaceTek Knee are projected to be available for purchase in Q1/24 and Q4/24, respectively. Together these two new innovative products have a total addressable market of approximately $3.0 b.”

In a research update to clients April 4, McLeish maintained his “Buy” rating and price target of $1.15 on EVMT, implying a return of 360% at the time of publication.

The analyst thinks Evome will post EBITDA of $852,000 on revenue of $62.6-million in fiscal 2023. He expects those numbers will be EBITDA of $2.01-million on a topline of $62.2-million in fiscal 2024.