CloudMD Software & Services Inc (TSXV: DOC) is digitizing the delivery of healthcare by providing patients access to all points of their care from their phone, tablet or desktop computer. The company offers SAAS based health technology solutions to medical clinics across Canada and has developed proprietary technology.

Why should Investors make an EXIT?

• Lower margin profile v/s Industry: In Q3 2021, the company failed on maintaining its pace and witnessed lower performance under operating margin matrix, consisting of gross margin, EBITDA margin, operating margin, and net margin. Furthermore, the margins beyond gross margin were all reported negative, which exhibits the extreme pressure on the company.

Source: REFINITIV, Analysis by Kalkine Group 

• Higher Cash Cycle days: The company is holding higher Cash Cycle (Days) compared to the industry, implying the company takes more days to convert its inventory to cash. Currently, its Cash Cycle is at 58.6 days compared to an industry median of 32.1 days.
  

• Bearish technicals: Exhausted technical indicators: On the daily chart, the stock is trading in a downward sloping channel below the trend line, exhibiting lower highs and lower lows, which is a bearish pattern, signaling the stock may experience price consolidation or correction due to a lack of strength. Furthermore, the stock closed below the 50-day and 100-day simple moving averages (SMA) immediate support levels, confirming a bearish pattern.
  

Valuation Methodology (Illustrative): EV to Sales based Valuation Metrics

Analysis by Kalkine group 

Stock recommendation

CloudMD is bringing new ideas to healthcare delivery by harnessing technology to increase access to care and improve health outcomes. This was a watershed moment for the corporation because it was the first time it recognized full revenue contributions from all of its recent acquisitions. On the other hand, it failed to keep up with the pace and saw weaker performance in the operating margin matrix, demonstrating the company's intense pressure. Furthermore, its cash cycle days are higher than the industry median, indicating a weak liquidity profile, even when the stock's technicals are weak, undermining its price. Therefore, based on the above rationale and valuation, we recommend a “Sell” rating on the stock at the current market price of CAD 0.76  at 10:11 Am Toronto time on February 04, 2022.

One-Year Technical Price Chart (as on February 04, 2022). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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