for your interest Neighbourly Pharmacy Inc. (NBLY.TO) was rated Market Perform with a $26 price target at BMO Capital Markets, and Sector Perform with a $28 price target at RBC Capital Markets on Monday.
The Toronto-based network of community pharmacies is focused on consolidating locations in rural and suburban areas.
BMO analyst Peter Sklar said Neighbourly's adjusted EBITDA is expected to increase at a compound annual growth rate (CAGR) of 30% over the next four years, driven by 25 acquisitions per year and organic prescription sales growth of 4%.
"Overall, we find Neighbourly's pharmacy roll-up story a compelling investment thesis as there is a significant valuation arbitrage opportunity," Sklar said in a note to clients. "However, since the IPO, the stock has run up considerably from the $17 issue price over a short period of time, resulting in limited potential return."
RBC analyst Irene Nattel said Neighbourly's growth story and operating backdrop are highly compelling, and her rating reflects the stock's more than 50% gain since the May 25 IPO.
"Our sector-leading earnings growth forecasts are underpinned by a long tail of consolidation opportunities, favourable demographic trends, and ongoing expansion of pharmacy services," Nattel said in a note to clients.
"With fiscal 2022-2025 estimated EBITDA CAGR +21% predicated on relatively conservative M&A assumptions, in our view, there is a strong argument for sustained valuation, and potentially, upward revision to forecasts," the analyst said.