National Bank launches coverage of VitalHub with an “Outperform” rating

National Bank Financial analyst John Shao likes what he sees from VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI).

As reported by The Globe and Mail, Shao June 10 initiated coverage of VHI with an “Outperform” rating and a price target of $14.00.

The analyst says there is a lot to like about VitalHub’s focused, growth-through-aquisition model.

“What sets VitalHub apart from other Canadian Tech roll-ups is its double-digit organic growth at an average of 16 per cent since 2022,” he said. “This robust growth underscores VitalHub’s strong market position and highlights its ability to identify high-growth targets while successfully executing cross-selling strategies and implementing price increases. Considering the organic Annual Recurring Revenue (ARR) growth and Adj. EBITDA, VitalHub’s base business has already met the Rule of 40 criteria, on which M&A adds incremental upside.”

So what’s ahead for the company? The analyst said the only impediment to its success may be the prevailing winds.

“For a software name that’s expected to maintain its growth momentum, the biggest risk we see at this moment is macro-related growth headwinds, as global trade and economic uncertainty have materially heightened since the start of the year,” Shao wrote. “However, we see multiple layers of protection as more than 80 per cent of VitalHub’s revenue is recurring and based on subscription term contracts. The healthcare and social services target verticals are also considered to be stable and high quality, as reflected in VitalHub’s low customer churn. Lastly, if you consider the ultimate funding source, those customers are essentially funded by governments, thus adding another layer of protection in an economic downturn.”

At press time, shares of VitalHUb were up 2.6% to $10.58.