Raymond James says VitalHub is still undervalued

The stock is already a Canadian success story, but Raymond James analyst Michael W. freeman thinks there is still money to be made on VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI).

In an initiation of coverage report March 26, Freeman gave VHI an “Outperform 2” rating and price target of $13.50.

The analyst says the trend to bring technology to healthcare is not going away, and VitalHub is well-positioned to profit from it.

“VHI is a pure-play healthcare software company that, through persistent organic growth and a steady cadence of acquisitions, is tapping into global single-payer HC software markets: a ~$10 bln opportunity, considering only the budgets of VHI’s focus geographies (UK, CA, AU, Middle East),” he wrote. “VHI offers a portfolio of >50 digital HC solutions to its >1000 customers, which comprise publicly-funded hospital systems, mental health organizations, and a variety of community and social services networks. While some of its key products enjoy >60% market share in geographies like the UK, VHI considers itself a provider of peripheral HC software solutions, filling the interstice between cornerstone products from large global vendors, furnishing investors with a predicable, high-margin, growth-driven business by addressing niche unmet needs in international markets.”

Freeman thinks VHI will post Adjusted EBITDA of 23.0-million on revenue of $84.0-million in fiscal 2025. He expects Adjusted EBITDA of $29.0-million on a topline of $91.0-million in fiscal 2026.

“We see the trends of strong global funding for HC digitization, increasing decommissioning of legacy software in favour of modern systems, and VHI’s strong mandate to cross-sell its flagship products as forces that should drive durable organic ARR growth. We note that cost-driven reorganizations of HC systems may be a tailwind for VHI, as its software solves the very problems these administrations seek to fix,” the analyst added. “With management’s long tenure operating in the sector and deep relationships with software vendors, customers, and sponsors (principally private equity), we believe VHI will continue to identify accretive transactions that grow both ARR and TAM, maintaining the top-shelf operating discipline that has driven VHI’s strong performance to date. We believe VHI is just now stretching its legs as a self-sustained compounder, and we won’t be surprised seeing the company begin to exceed its organic ARR growth targets in relatively short order, owing to the significant unaddressed TAM remaining in its focus geographies.”