Protech Home Medical (Vancouver: PTQ) (OTC: PTQQF) provides in-home monitoring and disease management services including end-to-end respiratory solutions for patients in the United States healthcare market, explains Ryan Irvine, contributing editor to Internet Wealth Builder.
It seeks to continue to expand its offerings to include the management of several chronic disease states focusing on patients with heart or pulmonary disease, sleep disorders, reduced mobility and other chronic health conditions.
The primary business objective of the company is to create shareholder value by offering a broader range of services to patients in need of in-home monitoring and chronic disease management.
The company’s organic growth strategy is to increase annual revenue per patient by offering multiple services to the same patient, consolidating the patient’s services and making life easier for the patient.
Recent financials: Revenues for the fourth quarter (to Dec. 31) were $25 million, an increase of $5.5 million or 28% over the same quarter in 2019. The growth in revenues is primarily due to the acquisitions of two businesses in the first quarter of fiscal 2020 and from organic growth of 3%.
Adjusted EBITDA for the quarter was $5.9 million, an increase of 69% from $3.5 million realized in 2019. Earnings showed a loss of $2.2 million compared to a gain of $5.5 million for the same three-month period in the previous year.
Balance sheet: As of Sept. 30, 2020, Protech had a cash balance of $38.9 million compared to $44.7 million on June 30. Working capital at the end of the quarter was $27.9 million, and the company had a debt and lease balance of $30.6 million, providing it with a net cash position of $8.3 million or $0.08 per share.
Valuation: Based on a trailing EV/EBITDA multiple, Protech trades at approximately 10.6 times, indicating that the company is relatively cheap in relation to its trailing twelve-month adjusted EBITDA.
If we are to value the company based on the midpoint of its forward adjusted EBITDA run rate of $28 million and trading at a justified EV/EBITDA multiple of 10 times, we estimate fair value at approximately $2.70 per share. After a pull-back in February, the stock has been moving up and is currently near its all-time high.
Conclusion: Protech remains an attractive growth by acquisition company in the healthcare sector. The company continues to announce acquisitions and execute on its growth strategy and recently declared its desire to up-list to Nasdaq, which could increase the stock’s exposure.
Management’s updated run-rate guidance is again positive with revenue of $130 million and adjusted EBITDA of approximately $28 million. As stated in our last update on Protech, if the company is able to further acquire accretive acquisitions and execute on the margin side of the business, we see further upside potential in the stock.
