Viemed Healthcare Inc. (TSX: VMD) is a provider of equipment and home therapy to patients with respiratory disease, oxygen problems, sleep apnea and PAP treatment. The Company also provides services to neuromuscular patients. Recently, the Company notified the inclusion of stock in the broad-market Russell 3000® Index, which is expected to enhance the liquidity of the stock going forward.

Q1FY20 Financial Highlights: VMD impresses with its quarterly results, wherein the Company reported revenue of USD 23.81 million as compared to USD 18.11 million in the previous corresponding period (pcp). The quarter was marked by ~25% higher sales from ventilator patients and USD 1 million of product sales related to the ongoing COVID-19 pandemic. Gross profit grew to USD 15.55 million as compared to USD 13.07 million in the previous corresponding quarter, primarily attributable to higher income. Income from operations increased to USD 4.61 million against USD 2.31 million in Q1FY19, thanks to the higher gross profit, lower research expenses and a gain on disposal of property and equipment while higher selling, general and administrative expense and higher depreciation expense remained a drag. Net income soared to USD 4.24 million from USD 1.95 million in pcp. The Company ended the quarter with cash and cash equivalent of USD 8.41 million, while total assets stood at USD 86.80 million.

Q1FY20 Income Statement Highlights (Source: Company Reports)

Risks: Home monitoring of patients is a relatively new business, making it difficult to predict market acceptance, development, expansion and direction. The company is witnessing a robust demand owing to COVID-19 pandemic. As the situation stabilizes and cases start to reduce, the group’s performance might impact adversely.

Stock Recommendation: The stock of VMD appreciated ~76% and ~35% in the last six-months and one year, respectively. The fundamentals of the company remain solid, and the company expects decent revenue growth in Q2FY20. The company expects its revenue within the range of USD 42 million to USD 44 million in Q2FY20 from ~USD 23.8 million in the current quarter, aided by growing products sales related to COVID 19, which is remarkable. Patients of COVID are witnessing respiratory issues which are driving the usage of the company’s product and services. The stock soared ~93% in the last three months and currently trading near its 52-weeks high of CAD 16.20. Further, the inclusion of the stock in the Russell 3000® Index has enhanced the market participants. On the valuation front, the stock is trading at a higher valuation compared to the industry (Healthcare Provider & Services) median. The stock is trading at a forward EV/Sales multiple of 3.4x against industry median of 1.4x and quoting at a forward EV/EBITDA multiple of 11.9x compared to the industry median of 10.3x. We believe, most of the positives have been priced in at the current level, and hence, we recommend a wait and watch stance on the stock at the closing market price of CAD 13.21 on July 13, 2020.

VMD Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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