Beacon Securities analyst Gabriel Leung has raised his target price on Canadian software company VitalHub (VitalHub Stock Quote, Chart, News, Analysts, Financials TSXV:VHI), which just came off a superb 2020. In an update to clients on Tuesday, Leung kept his \u201cBuy\u201d rating and took his target from $4.00 to $4.50 per share, saying VitalHub\u2019s robust organic growth and potential for M&A should make the stock attractive to investors. VitalHub, which develops and supports software for health services providers working in mental health, community health and regional hospitals. The company is a software consolidator, acquiring assets in electronic health records, case assessment, patient flow and operational assessment fields, while its software and services are used by over 275 clients in Canada, the US, the UK, Australia, the Bahamas, Qatar and Latvia. VitalHub issued a corporate update on Tuesday, announcing organic growth in excess of $1.0 million in annualized contract value (ACV) revenue during the fourth quarter 2020. ACV represents contracted annual recurring revenue including renewable software license and maintenance fees. The company said with the strong Q4 performance its ACV is now in excess of $14.5 million, which is an increase of 7.4 per cent from the previous quarter. VitalHub said 75 per cent of its ACV revenue was generated from its UK market and involved the adoption and sale of the company\u2019s Synopsis and SHREWD product sets, from recently acquired Intouch with Heath and Transforming Systems, respectively. Synopsis allows hospitals to digitally manage the entire assessment process while SHREWD is a product portfolio of real-time operational management tools. \u201cOur recent acquisitions in 2020 have added to our strong set of product offerings, giving VitalHub a robust suite of solutions that are currently providing a high degree of value to healthcare organizations around the world. Due in part to our great customer reference base and also to the strong team of industry experts deploying our offerings, other healthcare organizations are purchasing our digitally-enabled solutions to become more streamlined and efficient,\u201d said Dan Matlow, CEO, in a press release. \u201cVitalHub has achieved its strong revenue growth not only through acquisitions. As our organic growth has been demonstrating, our solutions are each industry leaders in their respective markets,\u201d Matlow said. \u201cThis organic growth is further proof that we are able to grow both organically and through M&A via our two-pronged growth strategy.\u201d Commenting on the corporate update, Leung wrote, \u201cWhile the company\u2019s recurring revenue business appears to be generating strong traction, we continue to await data points on how the non-recurring (~30 per cent of revenues) is faring.\u201d \u201cThe company does have long-term contracts in place to support this revenue line; however, we would remind investors that work has been constrained by COVID within certain projects,\u201d Leung said. After the update, the analyst has mostly left his 2021 estimates unchanged and has introduced 2022 numbers, which call for about 11 per cent recurring revenue growth, about 12 per cent total revenue growth and 21 per cent EBITDA margins. Leung thinks VitalHub will deliver full 2020 revenue and EBITDA of $13.1 million and $2.0 million, respectively, 2021 revenue and EBITDA of $21.0 million and $3.3 million, respectively, and 2022 revenue and EBITDA of $23.6 million and $5.0 million, respectively. Leung called for VitalHub\u2019s EBITDA margins to go from 15.3 per cent in 2020 to 15.7 per cent in 2021 to 21.1 per cent in 2022. Leung\u2019s new target of $4.50 which has been increased \u201clargely due to the passage of time,\u201d he said, is based on a 6x multiple of Leung\u2019s 2022 EV\/Sales and at press time represented a projected one-year return of 45 per cent. After a fairly flat 2019, VHI delivered a return of 63 per cent. Comparing VitalHub to its peers, Leung wrote, \u201cWe would point out that many of our recurring revenue SaaS names under coverage have experienced a multiple expansion over the past few months and are now trading in excess of 5x forward EV\/Sales.\u201d \u201cWith VitalHub currently trading at ~3.8x forward EV\/Sales, we view it as a compelling investment opportunity, particularly given the strong organic growth in its recurring revenue business, along with potential M&A opportunities leveraging its ~$24-million cash war chest,\u201d Leung said. VitalHub last reported earnings in November where its third quarter 2020 delivered revenue up 33.2 per cent year-over-year to $3.2 million and adjusted EBITDA of $502,595 compared to $523,669 a year earlier. During the fourth quarter, VitalHub closed on a bought deal for about $17 million involving about 5.9 million shares at a price of $2.90. The company plans to use the proceeds for growth initiatives, working capital and general corporate purposes and described its M&A as focused on \u201cthe acquisition of third-party enterprises in the health care industry which provide synergistic opportunities for the Company,\u201d according to a November 17, 2020, press release.