RE:RE:Beacon raises TP to $18.50 CdnLoving this section...double on the way!!!
Major Catch-Up Valuation Trade in the Works
• Even with the stock approaching a 52-week high, the stock still trades at just over 5x our FY24 EBITDA forecast (which is not far off from our proforma FY23 forecast). This is 2 multiple turns lower than QIPT’s immediate respiratory peers (VMD – T, Buy C$15.75 TP) and AdaptHealth (AHCO – US, NR) who both trade at ~7x based on FY23 forecasts. Other more healthcare service companies, such as Savaria (SIS – T, NR) and dentalcorp (DNTL – T, NR) trade at ~9x FY23 consensus EBITDA estimates.
• With ~$50 million (C$68 million) of estimated EBITDA, every multiple turn is worth ~C$2.00 per share (C$68m/36m shares outstanding = C$1.90). As such, just to catch-up to the current valuation of VMD and AHCO would add C$4.00 to the QIPT share price or 50%+ upside from here. To reach the valuation of SIS and DNTL would add ~C$8 to the current share price or over 100% increase from here.
• We remind investors that healthcare service companies have historically traded in the range of 8-12x EBITDA (as SIS and DNTL still do). With QIPT’s size (~$250 million in revenue next year), national scale and still under- levered balance sheet, we believe QIPT should trade at the high-end of that historic range.
• As such, we maintain our Buy recommendation and raise our target price to C$18.50 (was C$16.00).