Is Covalon Technologies stock a buy?

Research Capital analyst Andre Uddin maintained a “Buy” rating and $3.75 target for Covalon Technologies (Covalon Technologies Ltd. Stock Quote, Chart, News, Analysts, Financials TSXV:COV) in an Aug. 21 update following the company’s fiscal third-quarter results. He said Covalon “remains a decent GARP (growth at a reasonable price) play.”

Covalon, a Mississauga-based medical device maker focused on wound care, vascular access, and peri-operative products, reported revenue of $8.4-million for the quarter ended June 30, 2025. That fell below Uddin’s forecast of $9.3-million and declined 9.2% from $9.2-million a year earlier. The drop was attributed to normalization of channel inventory, the timing of purchase orders, and the impact of a stronger Canadian dollar.

Adjusted EBITDA was $900,000, below the $1.4-million forecast and down from $2.4-million in the prior year. Net income came in at $65,000 or $0.002 per diluted share, compared with estimates of $1-million or $0.04 per share and $1.4-million or $0.05 per share a year ago. Gross margin was 46%, down from 59% last year, while adjusted gross margin slipped to 56% from 64%.

The U.S. business generated $6.9-million in revenue, down 13.6% from $8-million last year, while revenue in the Middle East was $1.1-million, Canada $10,000, and Latin America $330,000, broadly in line with expectations. Operating expenses were $4-million versus $4-million a year ago, including SG&A of $2-million compared with $1.6-million, reflecting costs tied to strategic initiatives.

Uddin noted that Covalon acquired 15 new hospital customers during the quarter and retained all of its top 50 hospital customers from last year. As of June 30, the company held $18.1-million in cash and had no debt.

“Covalon’s U.S. vascular access and surgical consumables delivered a record high quarter of revenue with fiscal 2025 year-to-date revenue up by more than 35% versus the prior year, driven by significant growth from the VALGuard Vascular Access Line Guard product,” he said.

U.S. advanced wound care sales rose more than 40% sequentially and are up more than 85% over the past two years on a trailing 12-month basis.

Uddin added that management is actively exploring partnerships and potential product or company acquisitions to support inorganic growth, alongside developing new offerings to expand its portfolio.

He projects Covalon will generate $1.7-million in Adjusted EBITDA on $34.6-million of revenue in fiscal 2025, improving to $4.8-million on $39.6-million of revenue in fiscal 2026.

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