CareRX (TSX:CRRX) is a buy, this analyst says

Beacon Securities analyst Doug Cooper says future gains in CareRx (CareRx Corporation Stock Quote, Chart, News, Analysts, Financials TSX:CRRX) shares will be driven by new bed wins after the company strengthened its balance sheet and cost structure.

“We maintain our Buy recommendation and $6.25 target price,” Cooper said.

CareRx reported Q2 fiscal 2026 revenue of $93.6-million, Adjusted EBITDA of $8.0-million and adjusted EPS of two cents. Adjusted EBITDA margin was 8.6%, compared with 8.8% a year earlier.

Bed count rose to 91,719 from 90,048 a year ago, but was down slightly from Q1. Management reiterated its goal of adding 6,000 to 8,000 beds this year, implying year-end bed count of about 98,000 to 100,000.

Cooper said gross margin of 29.4% was down from 30.2% in Q1 because of Ontario’s defunding of unoccupied ward beds. He said the issue is expected to reduce annual revenue by about $2-million, but management expects to recoup the lost revenue as those suites are rebuilt and occupied, likely toward the end of 2027.

CareRx ended the quarter with net debt of $29-million, up from Q1 because of capital spending, a contingent liability payment tied to a previous acquisition and share buyback activity. The company also raised its quarterly dividend by 10% to 2.2 cents per share.

Cooper said CEO Puneet Khanna’s initial focus after taking over in May 2023 was cost reduction and deleveraging after CareRx lost a large Extendicare contract, which pushed bed count down from 96,500 to 87,600.

The analyst said those efforts are now visible, with revenue holding near $94-million despite the lower bed count, Adjusted EBITDA improving and net debt falling to $29-million from about $70-million.

“Thanks to these efforts, CareRx is now in an excellent position to benefit from bed count growth,” Cooper said.

The company announced a 3,000-bed win with a national retirement community company, which Cooper said is the first tangible evidence supporting management’s 2026 bed growth target. He said the contract is the company’s largest organic bed win in recent memory and lifts pro forma bed count to about 95,000.

Cooper estimates the contract could add about $12-million of revenue, with more than 10% flow-through to Adjusted EBITDA.

“In other words, the hard part of fixing the balance sheet and cost structure of the company is complete and future stock price gains will be driven by bed wins,” Cooper said.

He said additional bed announcements before year-end could support a strong second half for the stock, particularly given CareRx’s discount to peers.

Based on pro forma Q2 results, Cooper said the stock trades at about 7.2 times EV/EBITDA. Based on his fiscal 2027 forecast, it trades at six times, compared with the home care peer group at 17 times and Guardian Pharmacy Services at 22 times.

Cooper expects CareRx to generate Adjusted EBITDA of $36.4-million on revenue of $391.5-million in fiscal 2026, improving to Adjusted EBITDA of $42.1-million on revenue of $420.9-million in fiscal 2027.

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