Viewmed: Treating COPD with Ventilators

01/31/2020 5:00 am EST

Focus: HEALTHCARE

Ryan Irvine

President, KeyStone Financial

Viemed (Toronto: VMD), through its wholly owned subsidiaries Sleep Management and Home Sleep, is a participating Medicare durable medical equipment supplier that provides post-acute respiratory care services in the United States, notes Ryan Irvine, contributing editor to Internet Wealth Builder.

In layman's terms, the company places respiratory therapists inside the home to treat patients with very sick lungs. Many of these patients are unfortunately at the end stage of their life, at a time when they are most likely to visit the hospital. The service prevents these hospital readmissions from occurring.

The primary disease treated is COPD or chronic obstructive pulmonary disease. With almost 25 million Americans reporting that they have been diagnosed with COPD, it is the country's third largest killer behind cancer and congestive heart failure.

The company provides a solution for people who suffer from this debilitating disease.Viemed uses non-invasive ventilators (NIV) which allows caregivers to ventilate the patient with a mask versus forcing them to be in the bed intubated. The quality of life is better, and the healthcare costs decrease.

Viemed continues to expand geographically into new states and further expand its presence in existing territories, the company expects continued growth in an active ventilator patient base and ventilator rental revenue accordingly.

Given the company's clean balance sheet and solid cash position, we shift our fair value over the next year to the to the range of $10.75.

This fair value estimate over the next 6-12 months is based on current reimbursement rates and could fluctuate with the value of the Canadian dollar versus the U.S. dollar (a decrease is a positive adjustment, increase a negative) and based on management continuing cost controls and executing on the company's stated growth goals.

We expect similar to slightly higher EBITDA margin in 2020, which could lead to an increase in our fair value if revenues continue to grow organically at 30%+ rates.

We expect 2020 to be a volatile year for Viemed. The organic growth remains very strong and the company has faced significant challenges in the past and has come out ahead in the long term.

We expect a similar result over the next several years. We maintain our "Speculative Buy" recommendation. We continue to see long-term value in the current range with a 2-5 year holding period outlook.

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