Following recent marketing meetings, Eight Capital analyst Christian Sgro raised his target for shares of Vitalhub Corp. to a new high on the Street, expecting the Toronto-based healthcare company to continue to grow through M&A activity.
“We see the recent leg-up in the share price as an overdue catch-up and believe 1) there is little risk to the stable fundamental outlook and 2) the valuation still remains attractive compared to peers,” he said.
On Monday, Vitalhub announced the $2.5-million acquisition of U.K.-based BookWise Solutions Ltd., which provides specialist scheduling software for healthcare and corporate organizations
“We like the BookWise acquisition, which we would frame as bite-sized and exactly in-line with management’s consolidation strategy. With ample balance sheet capacity, we think more accretive and synergistic M&A will likely come,” the analyst said.
“We are updating our model to include the acquisition of BookWise. We have maintained 25-per-cent adjusted EBITDA margins or higher given management’s recent commentary that these levels are sustainable. We calculate pro forma net cash of $27.3-million, and total available liquidity of $60-million.”
Mr. Sgro increased his target for Vitalhub shares to $6.25 from $5, keeping a “buy” recommendation. The average is $5.71.
“Vitalhub currently trades at 10.4 times 2025 estimated EV/adj. EBITDA,” he said. “We think the Canadian software equities ... serve as a strong reference for comparable valuation analysis, with small-to-mid cap peers trading at 14.1 times and large cap peers trading at 21.8 times. We think Vitalhub deserves a premium compared to peers, given the company’s defensive attributes, recurring software profile, and stable cash flow generation.”
Elsewhere, Canaccord Genuity’s Doug Taylor bumped his target to $5.50 from $5.25 with a “buy” rating.
“The deal closed immediately and brings a small but synergistic asset that complements the company’s roster of patient flow management solutions in the UK market and expands its Australian presence,” he said. “We note BookWise marks VitalHub’s first acquisition in a year as the company looks to re-accelerate its M&A activity in 2024, as we suggested in last week’s roadshow recap.”