Beacon raises price target on VitalHub again

VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSX:VHI) posted better-than-expected quarterly results, with revenue of $23.9-million and EBITDA of $6.3-million, Beacon Securities analyst Gabriel Leung said in an Aug. 11 report. Leung maintained a “Buy” rating and raised his target price to $15.50 from $15.00.

He said Beacon had been modelling $21.8-million in revenue and $5.1-million in EBITDA, while consensus estimates were $22.1-million and $5.5-million. Headline EBITDA included $353,000 in foreign currency gains, which Beacon excluded from its calculation.

“On that basis, EBITDA would have been $5.95M or 24.9% EBITDA margins, which still exceeded our forecast, consensus forecast and was an improvement from Q1’s EBITDA of $4.9M or 22.7% EBITDA margins,” Leung said.

Revenue rose 47 per cent year over year in the quarter, including about half a month’s contribution from the Induction Healthcare acquisition, or roughly $480,000. The July 7 closing of the Novari Health acquisition is expected to add about $12-million in annual recurring revenue, or $3-million per quarter starting in the third quarter.

VitalHub ended Q2 with $94-million in cash and $15-million in debt. After quarter-end, it repaid the debt and used $35.8-million in cash to acquire Novari Health, leaving about $43-million in net cash. The company’s shares hit an all-time high after the results.

“Notably, the ~12% organic y/y improvement in ARR, along with the sequential improvement in EBITDA margins to ~25%,” Leung said.

The analyst said the company’s mergers and acquisitions pipeline remains active, with potential deals that could expand its presence in emergency room, ambulance and bed utilization services.

“While we do expect EBITDA margins to decline q/q due to the inclusion of Novari Health and a full quarter of Induction Healthcare (which were both slightly EBITDA negative), we also believe VHI has earned the right for investors to ‘Trust The Process,’ he said. “That is, leveraging its shared cost infrastructure to drive margin improvements over the near-term.

“Furthermore, with a relatively healthy demand backdrop in healthcare IT, along with its diversified portfolio of patient flow/operational visibility/patient journey optimization solutions, we believe VHI remains on track to maintain its coveted ‘Rule of 40’ status.”

Leung said the higher target price is based on a 25-times multiple of the estimated 2026 EV/EBITDA. He sees additional acquisitions as a key near-term catalyst for the stock.

Leung said that VitalHub should post $24.4-million in Adjusted EBITDA on revenue of $101.7-million in fiscal 2025. He thinks those numbers will improve to $34.3-million on revenue of $121.5-million in fiscal 2026.

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