Echelon Capital Following Quipt Home Medical Corp.’s acquisition of a business with operations in Mississippi, Texas and Louisiana, Echelon Partners analyst Stefan Quenneville reaffirmed his “top pick” recommendaiton for its shares, touting a “compelling” valuation.
The Cincinnati-based home medical equipment provider announced the deal with an undisclosed party on Monday for 10 locations across the three states that report unaudited annual revenues of approximately US$9-million with anticipated adjusted EBITDA of US$2-million post integration.
“While the price paid was not disclosed, presumably for competitive reasons, management highlighted that it was in-line with historical multiples it has paid for tuck-in acquisitions,” said Mr. Quenneville. “Therefore, we conservatively assume deal multiples approximately 0.9 times EV/Sales and 4.0 times EV/EBITDA (post-integration), consistent with the Company’s recent M&A track record, for a cash consideration of $8.0-million.
“Quipt continues to demonstrate that it remains in an M&A sweet spot, with ample opportunities to build regional scale in attractive markets such as Mississippi, Texas, and Louisiana as it consolidates the fragmented DME industry. With a healthy M&A pipeline and an attractive valuation relative to peers, we continue to view QIPT as a compelling opportunity for longer-term investors.”
Believing its balance sheet has room for additional details and its M&A pipeline “remains healthy,” he maintained a $11.75 target for Quipt shares. Thee average is $13.76.
“We view QIPT as a compelling opportunity for investors as it currently trades at 5.9 times versus its broader North American peer group currently at a median valuation of 10.7 times,” the analyst said.