TD launches on VitalHub with a “Buy” rating

Count TD Cowen analyst David Kwan as one of the believers in VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI).

On November 13, VHI reported its Q3, 2024 results. The company posed Adjusted EBITDA of $4.6-million on revenue of $16.5-million, a topline that was up 25% year-over-year.

“We are pleased to report strong third quarter 2024 results, continuing our path of driving stable revenue and cash flow growth,” CEO Dan Matlow. “Financial highlights include $16.5 million of revenue, 28% adjusted EBITDA ⁽²⁾ margin, and $1.1 million of sequential net new organic ARR ⁽¹⁻²⁾ in the seasonally quieter summer quarter. We are continuing to build on the success of our diversified portfolio, from a product and geographic perspective.”

As reported by the Globe and Mail, Kwan November 22 launched coverage of VHI with a “Buy” rating and a $13.00 price target on the stock.

The analyst says the company’s growth-through acquisition strategy has been a winner for investors and should continue to be.

“Led by an experienced management team with significant insider ownership (21-per-cent stake), we believe Vitalhub is on track to be a star performer on a larger stage, as it continues to execute well on its high growth and profitable roll-up strategy,” Kwan wrote. “Despite the surge in the stock this year, we believe there is more upside, especially if M&A activity remains strong.”

A look into the numbers has Kwan convinced that the company has a talent for organic and inorganic growth.

“Vitalhub has generated consistent 20-30-per-cent-plus year-over-year revenue growth, including 15-20-per-cent-plus year-over-year organic growth,” the analyst added. “M&A is expected to remain a key growth driver and near-term catalyst. With more than $50-milion in cash, solid FCF (more than $20-million last 12 months), and an unused $27-million revolver, Vitalhub is poised to remain active on the M&A front. It just closed its largest acquisition to-date (Strata Health – $32-million), with it targeting more large deals, which we believe increases M&A/integration risk. Vitalhub has built up its corporate infrastructure and will rely on its proven M&A playbook, including its Sri Lankan Innovations Lab (more than 50-per-cent cost savings) to help mitigate these risks.”