Covalon Technologies is a buy, this analyst says

Research Capital analyst Andre Uddin says Covalon Technologies (Covalon Technologies Stock Quote, Chart, News, Analysts, Financials TSXV:COV) delivered a strong fiscal Q3, helped by growth in higher-margin contamination protection products.

Uddin maintained his “Buy” rating and $2.90 target on Covalon in his Aug. 27 update.

Covalon Technologies is a medical device company that researches, develops, and markets patented products focused on infection prevention, advanced wound care, and medical device coatings.

Covalon reported fiscal Q3 revenue of $10.0-million, up 19.5% year-over-year and ahead of Uddin’s $9.4-million estimate. Adjusted EBITDA was $3.0-million, ahead of his $900,000 forecast and up from $900,000 a year earlier.

Net income was $2.8-million, or 10 cents per diluted share, compared with $100,000, or less than one cent per share, a year earlier. Uddin said quarterly EPS exceeded Covalon’s cumulative EPS from the previous five quarters combined.

Gross margin was 67%, above Uddin’s 56% forecast and up from 46% a year earlier. He said the improvement was driven mainly by growth in Covalon’s higher-margin vascular access products.

Covalon ended the quarter with $19.4-million of cash and no debt.

Uddin said contamination protection continues to drive growth, with Covalon’s U.S. hospital customer base increasing nearly three times over the past three years. The company retained all of its top 50 hospital customers from fiscal 2025, while revenue from those customers rose 46% year-over-year in fiscal Q3.

Covalon also added 58 new hospitals over the past nine months.

The analyst said the company has not seen a material financial impact from tariffs so far, though future trade restrictions could still affect costs, margins, supply chains or demand.

“Although COV is heavily exposed to the U.S. market, our understanding is that its products are not among the selected goods subject to the recently imposed 50% tariffs,” Uddin said.

Uddin expects Covalon to generate Adjusted EBITDA of $6.1-million on revenue of $35.8-million in fiscal 2026, improving to Adjusted EBITDA of $7.0-million on revenue of $39.9-million in fiscal 2027.

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